- »Melco Sells Crown Resorts Stake to Blackstone Group
Melco Sells Crown Resorts Stake to Blackstone Group
James Packer has been trying to offload shares of Crown Resorts for years. A huge potential buyout from Wynn Resorts fell through last year, but Packer had more hope for a buyer in 2019 when Lawrence Ho of Melco Resorts made an initial offer. That deal quickly became muddled with complications and investigations, though, and Melco took just 10%.
There is now a new light on Crown situation. Blackstone Group swooped in and bought Melco’s 10% this week. And while Melco is experiencing a wild company shakeup, Crown’s shares are soaring. And new speculation is growing about a potential buyout.
Starting from the Beginning
Let’s step back to the beginning of 2019 and take in the fuller picture.
As last year got underway, Crown Resorts and Wynn Resorts were in secret talks regarding a takeover. Wynn was prepared to take control of Crown Resorts in an A$10 billion deal. Wynn had been wanting a more significant presence in Asia, and this was one of the ways to storm that market.
However, Crown issued a statement about the proposal in April 2019. Wynn was furious and immediately called off the deal. Less than 24 hours later, Wynn issued its own statement that the “premature disclosure of preliminary discussions” prompted Wynn to terminate all discussions with Crown “concerning any transactions.”
From Wynn to Melco
Later in the year, Melco Resorts offered to buy a 20% stake in Crown Resorts, courtesy of Melco CEO Lawrence Ho. James Packer was more than ready to offload some of his shares.
The glitch in the plan was that Lawrence Ho’s father, Stanley Ho, had long been a target for Australian investigations. Long-standing rumors and some evidence pointed to the elder Ho’s links to organized crime syndicates. Australian regulators didn’t want the Ho family owning massive corporations in Aussie territory, which had led to a provision in Crown’s Sydney project agreement that Packer would have no dealings with Ho.
The Crown-Melco deal immediately came under scrutiny by New South Wales, and the NSW Independent Liquor & Gaming Authority launched a massive investigation into the deal. As that got underway in January 2020, with two other Crown investigations pending the outcome of that one, the younger Ho got spooked.
By February 2020, Melco withdrew part of its offer. The original offer was to purchase a 20% stake in Crown for A$1.76 billion, but only 9.99% actually happened. The other 10% was to happen at a later date, but the investigations proved to be too much.
Ho blamed the coronavirus spread around Asia, which prompted Macau to close all casinos for several weeks. And as the virus became a pandemic and prohibited most travel, Ho called off the deal entirely.
Packer had offloaded that initial 9.99% to Melco, but a larger deal fell apart.
Pandemic Provides Opportunity
There hasn’t been one casino in the world that escaped the financial hurt doled out by COVID-19. Casinos everywhere shut their doors in February or March to stem the spread of the deadly virus.
Crown was not immune. While the company tried to prevent the closure of its casinos with numerous precautionary and health-induced measures, the Aussie government did force their closures on March 23. Stocks plummeted. And Crown stood down approximately 10,000 workers initially, a number that eventually closed in on 18,500 employees.
Amidst the bad news upon bad news, Crown did receive one small reprieve. NSW put its investigation on hold until “it is considered safe and practicable for all public aspects of the work to resume.” Obviously, Crown had no objections.
Then, on April 29, Blackstone Group bought Melco’s stake.
Melco reportedly welcomed the deal, as it has been trying to reduce expenses and respond to the financial troubles created by the coronavirus. And Crown had no objection, as shareholders responded positively and Packer remains free of that nearly-10% of that stake.
The purchase included approximately 67.7 billion shares at a price of A$8.15 each. That put the value of the transaction at about $A551.6 million.
What It All Means
The initial reaction to the deal was a stock share price jump of 12.3%. The Australian Securities Exchange reported the price as low as $8.45 on Tuesday, April 28. And as the news of the Blackstone Group move went public, the price quickly rose to $9.65 on Wednesday and closed Thursday at $9.89.
Blackstone Group is an international private equity company, an asset management firm based in New York City. In the last year, the firm has increased its interest in gambling companies.
The most recent and high-profile buy happened In November 2019, as Blackstone purchased the Bellagio in Las Vegas from MGM for $4.25 billion. And it bought a controlling stake in MGM Grand and Mandalay Bay in Las Vegas at a price of $4.6 billion. The firm also bought into some assets involved in the Caesars Entertainment/Eldorado Resorts deal, including the Rio in Las Vegas. Prior to that, however, Blackstone acquired Superbet in Romania and Cirsa in Spain.
The ultimate goal is unknown, and it is unclear how far Blackstone will go to scoop up more gambling properties.
The speculation at the moment is that Blackstone Group may buy more of Crown Resorts, possibly all of it. This is purely a rumor at this point, but stocks continue to soar in the hopes of some truth in it.