Melco Puts Hold on Crown Share Purchase

The hits won’t seem to stop for Crown Resorts.

The latest news indicated that Melco Resorts & Entertainment decided to put its purchase of a 20% stake in Crown on hold for 60 days, pending the outcome of some of the regulatory investigations into Crown.

Deal Seemed to Be Solid

Their original deal became public in June of this year. Melco, under the direction of CEO Lawrence Ho, planned to buy a 20% stake in Crown from James Packer for A$1.76 billion.

The deal included the purchase of 135.35 million shares of Crown at A$13 per share.

Packer has long wanted to take some steps back from the business and focus on his mental health and personal life.

Ho’s offer came in shortly after extensive talks between Crown and Wynn Resorts fell apart. Wynn was looking to acquire Crown with a A$10 billion bid, but as soon as Crown made an announcement about the potential deal, Wynn pulled back and withdrew it altogether. The two companies never resumed talks.

When Ho stepped up to the plate, Packer was more than ready to deal.

The initial intent to purchase was complete on June 6, but there was already a delay in the closing due to a New South Wales regulatory investigation. That put the potential closing date out to the first week of September, tentatively.

Ignoring Concerns About Ho

The very mention of Lawrence Ho gaining a foothold in a major Australian business gave many regulators and lawmakers pause.

Lawrence’s father, Stanley Ho, was long suspected of doing business that involved connections to organized crime. The Ho family has always denied the allegations.

Stanley Ho is the founder of a holdings company that owns nearly 20 casinos in Macau. He also has investments across Asia and into Europe. He owns businesses in the fields of real estate, air transportation, banking, tourism, shipping, and entertainment.

He is believed to be worth several billion dollars. Approaching 98 years of age later this year, Stanley Ho has been slowly passing his business dealings to his children, including Lawrence.

Allegations of criminal ties generally point to a Chinese triad named Kung Lok, which Ho reportedly financed and aided through his casinos and related junkets. Some of the crimes included loan sharking, money laundering, and involvement in the drug trade.

Even so, there has never been enough proof or strong evidence to tie Ho, unequivocally, to the triads.

Lawrence Ho, then, is under suspicion for the same reasons, but it is unclear if the Australian regulators will find any concrete proof.

Packer and Ho Ties

The two casino moguls have long been linked via business deals and attempts to work together. Packer has known Stanley and Lawrence Ho for many years through the casino world.

But when the New South Wales Independent Liquor and Gaming Authority approved Crown for the Barangaroo project, Ho was excluded. That happened in 2014.

There was actually a provision in the agreement to prevent “any new business activities or transactions of a material nature between Stanley Huang Sun Ho or a Stanley Ho associate and Crown, any of Crown’s officers, directors or employees or any Crown subsidiary.”

When the recent Melco purchase of Crown shares came to light, the NSW regulator immediately instigated an investigation. The deal, it seemed, would be a clear violation of the Barangaroo agreement.

That investigation is pending.

Crown Under Investigation

While the Ho connections were the main reason that the Crown-Melco deal was under such scrutiny from the beginning, the tables have since turned.

This summer, a massive media investigation into Crown and its own links to organized crime resulted in a scathing report involving sex and drug trafficking and money laundering. And the casino’s partners were shown to have links to Chinese organized crime members.

Since then, the fallout has been severe, mostly in the form of multiple investigations by regulators like NSW. The Suncity junket, one of the largest in the region, was forced to cut ties with its Australian casino partners.

And now, the Melco deal is on hold.

Melco issued a statement announcing that it is delaying its 20% acquisition of Crown. The hold is for 60 business days after the completion of “relevant Australian regulatory processes.”

In addition, if the outcome of those regulatory investigations puts any restrictions on the Crown-Melco deal that Melco finds unreasonable, it will not proceed with the deal at all.

Further, if the deal does move forward, Melco will want to reduce the purchase price of its shares per any dividends that Crown received between June 6 and the final date of the purchase.

At this point, the entire deal between Crown and Melco depends upon the outcome of the NSW inquiry.