The romance between Hong Kong-listed Melco Resorts & Entertainment and Australian gaming operator Crown Resorts is over.
Last week, in a filing to the Australian Stock Exchange, Crown revealed that Melco sold its entire 9.99 percent stake in the company to an entity owned by asset management company the Blackstone Group. In a separate filing, Melco confirmed the sale to Midnight Acacia Holdings Pte Ltd., a unit of Blackstone Real Estate Asia. As a result of the transaction, Melco “has ceased to be a shareholder” of Crown Resorts, the company stated.
Melco sold 67.675 million Crown shares at a bargain-basement price—AU$8.15 (US$5.32) per share, or 37 percent less than it paid (US$8.49) to pick up the shares last May, for a loss of $330 million.
The outcome isn’t surprising, given an ongoing investigation of Crown by the New South Wales Independent Liquor & Gaming Authority, which has questioned the company’s suitability to run a $AU2.2 billion casino resort, now in development in Sydney. The VIP complex at Barangaroo is due to open in 2021.
At issue was Crown’s association with Melco Chairman and CEO Lawrence Ho, son of Macau gaming magnate Stanley Ho, who over the decades has been linked to organized crime in China, although he was never prosecuted or convicted. The inquiry also was looking at revelations that Crown went into business with Asian crime-linked junkets to drive Chinese high-rollers to its Australian properties.
The probe is currently postponed due to Covid-19, but Crown honcho James Packer and Ho were both expected to be called to testify in the public hearings.
Melco was also influenced by the current health and economic crisis. The company had noted earlier this year that offloading its Crown stake was a “potential source of liquidity” in case Melco had additional “capital needs.”
Melco originally planned to buy a 19.9-percent stake in Crown, and there was speculation that Ho planned to gradually build his ownership stake in the company owned by his old friend and former business partner James Packer. But in February, Melco said it would not pursue the purchase of the second tranche of shares because of the “impact of the coronavirus epidemic.”
According to the Sydney Morning Herald, the dissolution of the Crown-Melco relationship has renewed speculation about a takeover by Blackstone or a global casino operator. Packer previously indicated his willingness to sell his 36 percent share in Crown; in 2018, he stepped away from his leadership role in the company due to ongoing depression.
The Blackstone Group as one of America’s largest private equity and hedge fund firms with extensive interests in the gaming and hospitality industries. Those interests include acquisition of the Cosmopolitan in Las Vegas in 2014, a stake in the joint venture that purchased the real estate assets of the Bellagio from MGM Resorts in 2019 and a similar deal with MGM for the real estate assets of MGM Grand and Mandalay Bay earlier this year. Blackstone is also the owner of Clarion Events, the parent company of the ICE trade shows and conferences, some of the largest in the gaming industry.
The company previously acquired Hilton Worldwide Holdings in 2007 but had gradually divested its interests and sold the rest of its stake in 2018.
In other Melco news, several senior executives are on their way out as the Covid-19 pandemic continues to decimate the global gaming industry. In internal communications published by GGRAsia, Lawrence Ho announced the “voluntary departure” of the executives. The letter also stated that Melco Resorts’ corporate executive team would reduce their salaries by 33 percent for the remainder of this year and “forfeit all unused leave.” Ho will also forego his salary for the remainder of 2020.
In the letter to staff, Ho said the coronavirus crisis is affecting the company’s business, shutting down operations in the Philippines and Cyprus as well as devastating business in Macau. Ho also said the departure of several of the company’s senior executives was “only due to the current state of the business environment.”
In the leadership shuffle, Clarence Chung, a member of the Melco board, will oversee government relations. Evan Winkler will oversee analytics and strategy, and both the Manila and Cyprus projects will report to him. Kevin Benning is moving from Manila to Studio City where he will senior vice president of operations, reporting to David Sisk. And Akiko Takahashi will add the executive vice president and chief of staff roles to her human resources duties.
Along with resorts in Macau and Manila, Melco is the leading partner in a consortium that runs gaming operations in the Greek-controlled Republic of Cyprus.
