Crown Resorts Sells $1.2 Billion Stake in Macau, Pulls Out of Alon Vegas Project
Posted on: December 15, 2016, 02:00h.
Last updated on: December 15, 2016, 02:18h.
James Packer’s Crown Resorts has made a dramatic U-turn on its global expansion strategy, suddenly and unexpectedly retreating from both Las Vegas and Macau, the two biggest gambling hubs in the world.
Crown dropped the bombshell during an earnings call on Thursday. The company announced that not only will it sell $1.2 billion worth of shares in its Macau casino business to its joint venture partner, Melco International, but it will also cut ties with the $1.9 billion Alon development, currently being built in Las Vegas on the site of the old Frontier Hotel and Casino.
The sale of Melco-Crown shares represents over half of Crown’s equity in the joint-venture and cedes control of the company to Melco boss Lawrence Ho.
Crown will now own just 13.4 percent of the venture, with Packer removing himself from the board.
China Arrests “Changed Outlook”
The move emphasizes just how much Beijing’s anti-corruption squeeze, and the resulting decline in VIP gaming revenue in Macau, has laid waste to Crown Resorts’ ambitions.
And the arrest, in October, of 18 Crown employees on the Chinese mainland for “gambling crimes” may have been the straw that broke the camel’s back.
The employees were detained by Chinese authorities on suspicion of illegally marketing gambling to high rollers on the mainland for its properties in Macau. Among them were four Australians, including vice president of Crown VIP division Jason O’Connor.
“There’s no doubt that those arrests changed everyone’s outlook for the sector,” Angus Gluskie, a portfolio manager at White Funds Management, which holds Crown shares, told Reuters. “It’s not as easy as it previously looked.”
Crown said it would use its $1.2 billion windfall to cut debt and pay a special dividend of $368 million, over half of which will go to Packer.
Packer Packs his Bags
Meanwhile, the company declined to go into detail about why it was pulling out of the Vegas project, other than that it followed “an extensive review of funding alternatives… over the last two years.”
Alon was to be Packer’s second foray into Las Vegas following an ill-fated dalliance with Cannery Casino Resorts back in 2009. The company was poised to buy Cannery for $1.8 billion, only to back out of the deal due to the economic downturn and was forced to pay a breakup fee of $320 million.
Crown said would seek to gain value on its investment in Alon and would consider selling its entire stake in the offing. It bought the vacant Frontier plot in in 2014 for a reported price of $260 million, in partnership with Los Angeles-based asset firm Oaktree Capital Management.
Crown chairman Robert Rankin said its international retreat would maximize value for shareholders and “underpin the company’s future of the next decade,” as it continues to focus on domestic projects.
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