Crown Resorts Cuts Stake in Macau Casino
Australian billionaire, James Packer, has stepped down as co-chairman of Melco Crown Entertainment in Macau following Crown Resort’s sale of part of its stake in the casino operation. Packer will now take up the position of deputy chair of Melco.
The sale will result in Crown’s stake being reduced from 34.3 percent to 27.4 percent with Melco to repurchase 155 million shares from Crown Asia Investments, a Crown subsidiary. Crown plans to use the $1.07 billion ($800 million) proceeds of the sale to help cut down its large debt pile; however despite the sale, Crown has stated that it intends to preserve “a significant investment” in Melco.
“Following completion, Crown will assess its capacity to make a distribution to shareholders, and at the same time maintain a strong balance sheet and credit profile to fund existing Australian development projects, including Crown Sydney,” read a statement from Crown to the ASX on Wednesday. “Crown will provide an update to the market once it has completed this assessment.”
Crown has made its move at a time when revenue in Macau, the largest gambling hub in the world, has been dropping. Despite Macau being the only place where Chinese nationals can gamble legally at casinos, revenues have been dropping over the past two years as the Chinese government cracks down on corruption and economic growth has slowed.
The sale will give Lawrence Ho, son of Macau gaming-industry legend Stanley Ho, full control over the operation of the company.
“The company’s free cash flow generation and strong balance sheet make this an opportune time for us to complete this transaction, which is consistent with the purpose of our existing share repurchase plan,” commented Ho. “Crown remains a major shareholder in the company and we look forward to continuing our relationship.”
April 16, 2017