James Packer's Crown Resorts has doubled down on its massive retreat from its international operations, agreeing to sell a further $300 million of its stake in its Macau casinos.
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Crown announced on Friday it had entered an underwriting agreement to sell 40.9 million shares in Melco Crown Entertainment to institutional investors, in addition to the 98 million shares it said on Thursday would be sold to its joint venture partner, billionaire Lawrence Ho's Melco International Development.
That brings the total value of Crown's Macau sell-off to $1.9 billion and will cut its stake in the troubled casino venture from 27.4 per cent at the start of the week to 11.2 per cent when the selldown is completed. Deutsche Bank, UBS and Morgan Stanley are arranging the sale.
The retreat from the world's biggest gambling hub follows the arrest of 18 Crown employees in China for "gambling crimes" in October, and after a two-year downturn in the Chinese territory's casinos caused by a government corruption crackdown.
Crown said it would use the money raised to pay down $800 million of debt. The extra $300 million raised with the public share offer will boost the special distribution it plans to pay shareholders by $100 million to $600 million, and increase a planned share buyback by $200 million to $500 million. James Packer stands to get $288 million in special distribution money from the selldown, which effectively buries his ambitions to run a global casino empire.
Crown revealed on Thursday it was also shelving plans to build a new casino in Las Vegas, following "an extensive review of funding alternatives… over the last two years", and was canning a plan to spin off its international gaming assets to focus on its casinos in Australia, led by the $2 billion high-stakes Barangaroo resort in Sydney.
"This is all about risk management," said Theo Maas, who helps oversee about $3 billion in assets including Crown shares at Sydney-based Arnhem Investment Management. "You're now looking at a much more predictable business with a much stronger balance sheet."
Even so, Packer's retreat to Australia is not 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 casino in Sydney. The China arrests have raised questions about the gambling giant's ability to draw in Chinese high rollers.
Melco Crown's US-traded shares fell as much as 8.4 percent to $15.86 in New York on Thursday. Shares of other casino operators with Macau interests, including Las Vegas Sands Corp. and MGM Resorts International, also declined.
Melco Crown listed in 2006 in New York as a joint venture between Ho and Packer and raised more than originally planned at $US19 per share. The stock price peaked in 2014, rising to $US45.16 that March and has since tumbled to below its debut price.
Crown shares, which were halted from trading on the ASX for Thursday's statement, have fallen 9 per cent this year and haven't had a positive year since 2013. At the same time, shares in rival Star Entertainment Group, owner of Sydney's Star casino, are on course for a third straight year of gains.
Crown said it expects the Melco Crown public share offer to wrap up by December 20. Subject to its share transfer to Melco International being completed, the special dividend and the buyback would go ahead in the June quarter.
with Bloomberg
