Crown Resorts Initiates Complete Withdrawal from Macau, Sells Remaining Shares to Melco International
Posted on: May 8, 2017, 05:00h.
Last updated on: May 9, 2017, 08:10h.
Crown Resorts will divest itself of its remaining shares in Melco Resorts and Entertainment, the company that was, until last month, known as Melco Crown. The move completes James Packer’s total withdrawal from Macau.
The news comes almost exactly one year after Packer’s Crown Resorts made the shock decision to cut its stake in the company it had formed jointly with Lawrence Ho’s Melco International from 34.3 percent to 27.4 percent. This was just five months after the opening of Melco Crown’s long-awaited $4.5 billion Studio City resort.
In hindsight, the timing could hardly have been worse. After almost two years of tumbling revenues in Macau, Crown Resorts wanted to rein in its international expansion and reduce its exposure to the gambling hub in order to concentrate on projects closer to home.
Timing is Everything
Packer’s Asian dream had failed, shattered by Beijing’s anti-corruption drive of 2014. The Melco Crown properties, cooked up in a climate of seemingly unassailable prosperity for Macau, then one of the fastest-growing economies in the world, were not providing the returns he expected.
“I don’t think any of the operators could have predicted what has happened now,” said Packer in mid-2015, adding that the crackdown had been “more severe” than anyone could have imagined.
“As an Australian investor in China and Macau, it’s very hard to be critical of a corruption crackdown… [but] when and how that ends is something that no one knows.”
Unfortunately for Packer, the downturn ended at the very moment he decided to cut his stake in Melco Crown. Macau bottomed out in May 2016 and has been growing ever since.
But last October, the detention of 14 Crown Resorts employees in China on suspicion of gambling-related crimes proved to be a catastrophe for the company, forcing it to completely reevaluate its policy towards the country.
In December, amid a major reshuffle of the board and talk of an economy drive, Crown further reduced its stake in Melco Crown, to 11.2 percent, ceding the controlling stake to Melco International.
Melco quickly used that controlling stake to propose changing its English name to ditch the “Crown” bit altogether, a proposal agreed by shareholders last month.
Packer may not have completely abandoned his international expansion plans, however. Sources who spoke to the Australian Financial Review recently suggested Crown’s economy drive may be part of its preparation to for a push into Japan, which in December passed its Integrated Resorts Act and is at last preparing to build a regulate casino market through foreign investment.
If true, this would pit former partners Crown Resorts and Melco International against one another, and others, in a bidding process that is likely to be fierce.
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