Another major gaming company has decided to spin off its properties into a separate real estate investment trust (REIT) and remain as the operator of those properties. But before that happens, Australia’s Crown Resorts will spin off its international operations into a separate publicly traded company.
Crown’s four Australian hotels, except for its flagship, Crown Melbourne, and it’s proposed project in Sydney’s Barangaroo section, will be included in the REIT, which will be owned by the REIT and managed by Crown. Crown will own 51 percent of the REIT.
The new international company will be traded on the Australian Stock Exchange, and will include Crown’s 27 percent interest in Macau’s Melco Crown, owners of the Altira, City of Dreams, Studio City and City of Dreams Manila casino resorts; its controlling interest in the proposed Las Vegas project, Alon; its 50 percent interest in British gaming company, Aspers; a $22.5 million investment in Caesars Entertainment; and its 20 percent stake in restaurant-hospitality company, Nobu.
Crown Resorts will continue to own four Australian casinos and its online gaming companies, CrownBet, Betfair Australasia and social gaming company DGN Games.
In addition the company announced a new policy that would pay dividends on 100 percent of its after-tax normalized profits. Had that been in effect during the last fiscal year, it would have meant a 70-cent per share return, rather than the 52 cents that it actually provided.
The spinoffs come out of frustration with the perception of the company; a “material undervaluation,” said a press release.
The valuation of Crown had been tied to the decline in the fortunes of the Macau properties. Even though the Australian casinos had performed well over the last two years, the valuation of the company was impacted by the negative revenue numbers in Macau. The new structure should isolate that concern in the new international company, but also isolate the growth possibilities in that entity. Crown Resorts and the REIT would only experience organic growth since a disbursement of all profits would not leave anything on the table for purchases or new construction.
For Packer, the majority shareholder in Crown, it could mean a $2 billion windfall. But it will come without any formal involvement with the company. Experts expected Packer to get some senior title after he stepped down as chairman last year, but the arrangement calls for no title and no salary. While Crown would be able tap the expertise of Packer’s own company, Consolidated Press Holdings at a negotiated hourly rate, Packer would have to provide his service for free.
“This new corporate structure well positions Crown for the next decade as we continue to grow our business and meet the needs of the emerging Asian middle class,” Packer said. The son of the late media magnate Kerry Packer isn’t hurting—he still has a net worth of $3.4 billion, and will stay on as deputy chairman of Melco Crown.
Each Crown shareholder would get an equal amount of the new companies, and give Packer a wider and more diverse Crown portfolio.
