Crown exits decade-long Macau venture with Melco buyback

Casino billionaires Lawrence Ho and James Packer have said their last adieu to a decade-long gaming partnership in Macau, with each going in opposite directions.

Packer’s Crown Resorts Ltd. said it’s selling the last of its stake in Melco Resorts & Entertainment Ltd. and will receive about USD987 million from the transaction, according to an exchange filing yesterday. The company said it will use the net proceeds to reduce Crown’s net debt.

Hong Kong billionaire Lawrence Ho, who controls the casino and resort developer, kicked off a share sale to fund the concurrent repurchase, the company said Monday in a filing. While calling Packer a “great friend and partner,” Ho said he’s taking the solo route in a global expansion, with Japan as the next target. Packer, on the other hand, is retreating back to Australia.

“Despite our positive history with Crown, I made the strategic decision to terminate the joint venture arrangement and allow Melco to pursue Japan alone,” said Ho, chairman and chief executive officer of Melco Resort & Entertainment, in a statement. “This highlights our confidence in and commitment to, identifying and evaluating new markets which will drive long-term shareholder value.”

Shares of Crown Resorts gained as much as 1.5 percent yesterday in Sydney. Shares of Melco fell 3.9 percent, the most since February, on Monday in New York where it’s listed.

Crown Resorts began selling down its stake in Melco Crown last year, in the aftermath of a clampdown by Chinese authorities in October, when more than a dozen Crown staff were detained for alleged gambling crimes. It’s now mostly focused on its Australian resorts and development projects in the country.

Melco said Monday that it offered to sell 27.8 million American depositary shares and almost 82 million ordinary shares along with the buyback. Terms showed separately that 15.8 million ADS were offered at $21.25 to $21.45 each via Deutsche Bank AG, UBS Group AG and Morgan Stanley.

Melco Resorts’ majority shareholder, Melco International Development Ltd., will repurchase its joint venture partner Crown Resorts’ remaining stake in the company as part of the deal, according to a statement Monday. Upon the completion of the share repurchase on May 15, Crown Resort will cease to be a shareholder in the company and Crown’s sole remaining nominee director will resign as non-executive director.

In the long-run, the partnership’s end is a net positive for Melco that puts it in the driver’s seat, said Union Gaming Group LLC analyst Grant Govertsen.

“The total elimination of Crown (and therefore the dissolving of the JV) is a positive for Melco,” Govertsen said. “While the Melco side of the JV already had majority control, this transaction cements the control and allows Melco to solely determine strategies going forward.”

Ho, whose company also operates a casino in the Philippines and owns a controlling stake in a Russian gaming resort, said in an interview with Bloomberg earlier that the company “will do whatever it takes” to get a casino license in Japan.

Japan legalized casino gambling last year, and legislation on the rules for the industry will be introduced in coming months. He forecast the country could “easily” be a $20 billion market if cities such as Osaka or Yokohama had one or two casino resorts. Vinicy Chan, Drew Singer and Daniela Wei, Bloomberg