Melco May Be Open to Selling $880m Crown Resorts Stake

  • Melco Resorts' president indicated that the company could be open to selling shares
  • CEO Lawrence Ho said the business is now focused on ensuring stability for its Macau casinos
  • The company had originally tried to buy a 20% stake in Crown Resorts, worth AU$1.76bn
  • The deal was only half completed as an inquiry began into Crown's Sydney casino license
businessperson pointing at charts
Melco Resorts may be open to selling its $880m stake in Crown Resorts as it seeks to stabilize its Macau business. [Image: Shutterstock.com]

10% stake a “potential source of liquidity”

Hong Kong-based company Melco Resorts has indicated it could be open to selling its AU$880m (US$591m) stake in Australian casino group Crown Resorts.

Company president Evan Winkler hinted at the possibility at the latest quarterly earnings call that took place overnight on Thursday. The call included questions on whether the 10% stake in Crown Resorts would be sold.

Winkler said that, while he did not see any “urgency” in putting the Crown shares up for sale, “we’re evaluating every single aspect of the business” in view of the ongoing health crisis in Asia.

He established that shareholders have identified the Crown Resorts assets as “not a majority-owned and operated portion of the Melco portfolio.” He concluded:

So, to the extent that there were capital needs going forward, that would obviously be a potential source of liquidity.”

Immediate focus is on Macau business

During the Q4 earnings call, CEO Lawrence Ho credited Crown Resorts with “amazing assets”, but reiterated that Macau was Melco’s key focus for now.

He said: “Given the severity of the coronavirus and the impact to our business, we’ve taken a very detailed look at all of our capital expenditures. I think our immediate focus right now is really the stability of our Macau business and the safety of our staff and colleagues in Macau.”

Original $1.76bn deal abandoned

In 2019, Melco Resorts & Entertainment Limited originally made a deal to buy 20 per cent of Crown Resorts to secure seats on its board. The acquisition would be worth AU$1.76bn (US$1.18bn).

However, only 10%, or half of the deal agreed, was eventually exchanged.

Melco announced earlier in February that the remaining AU$880m would not be forthcoming after it decided to focus its interest on the Macau casinos. This was mainly due to the devastating impact the coronavirus has had on tourism in the region. Macau casinos have only just reopened after a mandatory 15-day shutdown.

The remaining 10% was also partly sunk due to an ongoing public inquiry by the New South Wales (NSW) gaming regulator, which looked at whether the acquisition could have breached Crown Resorts’ Sydney casino license.

The investigation saw Stanley Ho, the father of Melco CEO Lawrence Ho, banned from any involvement in the new casino being built at Barangaroo, in view of his past links with organized crime.

The NSW inquiry is due to resume this week. It will be looking at the use of “junkets”, where wealthy Chinese gamblers are brought to Australian casinos.