James Packer’s Crown Resorts is to sell $800 million of its shares in Melco-Crown back to the company, reducing its stake in the Macau-based operation from 34 percent to 27 percent. Packer will also step down as co-Chairman of Melco-Crown. His co-chair Lawrence Ho will increase his stake in the company and is said to be supportive of the move.
It’s a surprising one, nevertheless. Just six months ago Packer celebrated the opening of Melco-Crown’s new integrated casino resort, Studio City, Macau, a $4.5 billion project on the Cotai Strip, that was years in the making. At the time, he declared himself to be incredibly excited about “the long-term macro picture for Macau,” despite the region’s persistent decline in revenues.
It seems Packer is reining in his Eastern expansion, an ambition until recently he pursued tenaciously, and concentrating instead on projects closer to home, and in Las Vegas.
Credit Where Credit Is Due
Crown is in building casino resorts in Sydney, Melbourne and Perth and is also finally about to make its mark on the Vegas Strip. Packer has acquired the plot of land on which the New Frontier Hotel and Casino once stood, where work has begun on the construction of Crown’s Alon development, a $1.9 billion casino resort.
Analysts have estimated that Crown will need almost $3 billion over the next five years to fund these projects, and the sale of the shares in Melco-Crown may be a means of keeping the company’s credit rating on the straight and narrow as it seeks investment.
Late last year it was reported that Crown was having trouble raising the $425 million it wants for the Alon project to help it reduce risk, a fact that may delay the development beyond its 2018 scheduled completion.
Zero Chance of Privatization
Australian financial analyst Bell Potter said this week that the sale of the shares showed that Crown is concerned about its current debt level and is “lightening the load.”
“The major Crown shareholder wanted them to do it, hence the potential for a capital return with part of the $US800m,” it said.
Bell Potter also believes that the sale suggests there is “zero chance” of Packer taking the company private, as had been recently speculated. This speculation was fueled by Packer’s decision to step down as director of Crown Resorts last December, just four months after he surprised many by resigning as company chairman.