Packer’s Crown reaps USD1.4b as Macau casino stake cut

Billionaire James Packer’s Crown Resorts Ltd. reaped AUD1.9 billion (USD1.4 billion) by slashing its stake in a Macau casino venture, cutting exposure to the volatile gaming market and refocusing its operations on Australia.

Crown agreed to sell 40.9 million shares in Melco Crown Entertainment Ltd., or about 2.8 percent of outstanding stock, the Melbourne-based company said Friday in a statement. It also agreed so-called cash-settled equity swaps on about 81.9 million shares, or a holding of more than 5.5 percent.

The sale came after Crown abandoned a proposed spinoff of international assets and announced it was selling half of its stake in the Macau venture to partner Melco International Development Ltd. Proceeds from the sales will be used to cut Crown’s net debt by about A$800 million and return A$1.1 billion to shareholders, according to the statement.

The changes, which limit the company’s exposure to a volatile Macau gaming market, are a “good outcome for shareholders,” Ravi Reddy, an analyst for Morningstar Inc. said in a note to clients. “Crown will emerge as a domestic pure play with relatively defensive earnings and growth options from Crown Sydney, positioning the company to continue leveraging the Chinese market from the safety of Australia.”

Crown rose 2.4 percent to A$11.64 at 11:03 a.m. in Sydney, paring this year’s decline to 6.8 percent.

The share sales, and an announcement that Crown is considering selling an undeveloped plot in Las Vegas, signal that Packer is reining in plans for a gambling empire spanning the world’s largest gaming markets.

Even so, his retreat to Australia isn’t without danger. More than a third of Crown’s revenue at its Melbourne and Perth resorts comes from international visitors, predominantly mainland Chinese, and they will be the mainstay of the planned A$2 billion Sydney casino. The roundup of 18 Crown staff in China in October for alleged gambling crimes has raised questions about the company’s ability to draw in Chinese high rollers.

Amid the detentions, turnover from Crown’s program for high-wagering, top-priority customers at its Australian resorts slumped 45 percent from a year earlier in the most recent 23-week period, Crown said Thursday.

The sale and equity-swap transaction announced Friday were priced at $5.33 per Melco Crown share, or equivalent to $16 for the company’s U.S.-listed depository receipts, Crown said. The swap provides the Australian company with a “price hedge” in respect to the Melco Crown shares.

The returns to Crown shareholders will comprise a special distribution of about A$600 million and a buybuck of about A$500 million, the company said. Subject to the completion of the sale to Melco International, the special distribution and buyback will take place in the second quarter of 2017, Crown said.

Melco Crown listed in 2006 in New York as a joint venture between Packer and fellow gaming billionaire Lawrence Ho and raised more than originally planned at $19 per share. The stock price peaked in 2014, rising to $45.16 that March and has since tumbled to below its debut price. Melco Crown shares closed 6 percent lower in New York Thursday at $16.28.

Crown is continuing to study an initial public offering of 49 percent of a property trust that would hold some of its Australian hotels, it said Thursday. Packer owns about 48 percent of Crown Resorts. Bloomberg