A reflection of “confidence” in Melco
Gaming operator Melco International Development Ltd. has announced that shareholders including CEO Lawrence Ho have approved a US$500 million (HK$3.9 billion) share repurchase of subsidiary Melco Resorts & Entertainment Ltd.
According to the Macau News Agency, the repurchase started on November 8 and will be valid for three years. Three Melco Resorts shares will be the equivalent of one American depositary share. Parent Melco International is listed on the Hong Kong Stock Exchange, and Melco Resorts on NASDAQ.
Melco said the share repurchase “reflects the confidence of the company in Melco Resorts’ long-term strategy and growth prospects.”
In a previous share repurchase in March, Melco Resorts repurchased more than 22,570,000 ADSs—the equivalent of 67.7 million Melco shares—on the open market for an aggregate consideration before expenses of US$490 million. Melco International holds more than 50 per cent of Melco Resorts, with the repurchase increasing its control on the gaming company.
In other Melco news, Studio City International Holdings Limited has tallied total proceeds of US$406.7 million from its initial public offering of American Depositary Shares. Melco had previously announced proceeds of US$359 million, but has revised that number upwards after the underwriters of its IPO exercised an over-allotment option in full to purchase an additional 4,312,500 ADSs from Studio City at the IPO price of US$12.50 per share.
The proceeds will be used to acquire newly issued shares in Melco subsidiary MSC Cotai Ltd., which holds a 60 percent stake in Studio City. MSC Cotai Ltd. will use those proceeds to repay debt.
Vitaly Umansky, Eunice Lee and Kelsey Zhu of Sanford C. Bernstein Ltd. says the IPO was a “positive event” for Melco Resorts. “The IPO effectively reduced net debt at Studio City, while Melco Resorts maintained majority ownership and bought into Studio City with inexpensive debt. If Melco were to eventually buy out minority interest in Studio City, the IPO and public market trading price also help set a price threshold.”
