ETF News

Australia's Crown Resorts shares drop as stake sale to Melco dampens buyout hope

SYDNEY, May 31 (Reuters) - Australian casino giant Crown Resorts Ltd saw its shares tumble on Friday, after a surprise $1.2 billion selldown by founder James Packer to Hong Kong’s Melco Resorts & Entertainment Ltd dampened hopes for a full buyout.

Late on Thursday, Crown and Melco said billionaire Packer would sell 19.99% of the company, nearly half his 47% stake, to Melco at market price, 10% below a full takeover approach from Las Vegas-based Wynn Resorts Ltd that was aborted last month.

Crown shares fell 5% in morning trade on Friday to their lowest since April 8, the day before Crown disclosed the Wynn indicative offer of A$10 billion ($7 billion) or about $A14.75 per share, as investors fretted that the U.S. suitor was now less likely to return. The broader market was flat.

If Melco CEO Lawrence Ho “buys any more it obviously becomes a bit harder for him to go further unless he’s committed to doing something much bigger”, said Angus Gluskie, portfolio manager at White Funds Management, which owns Crown shares. “This would also block out a bid coming back from Wynn probably.”

In Australia, 19.99% is the biggest shareholding an entity can own in a company before being required to make a formal takeover offer. A major deal involving an overseas investor must also be cleared by Australia’s foreign investment regulator.

Crown is also required to undergo a regulatory review in the state of Victoria every five years to ensure it can continue to run a casino there. Its biggest operating Australian casino is in the city of Melbourne.

In a Reuters interview on Thursday, Lawrence Ho said he planned to increase Melco’s stake in Crown, but would first submit applications with the regulators.

The Victorian Commission for Gambling and Liquor Regulation and Liquor & Gaming NSW were not available for comment.

According to local media reports in 2014, Crown was required by the neighbouring New South Wales state regulator to promise no material transactions between Crown and entities associated with Ho’s father, Stanley Ho, in order to get the regulatory nod for a A$2 billion tower on the Sydney waterfront.

Stanley Ho was at the time under investigation in Australia and the United States for possible ties to organised crime, the reports added. Crown had said then that Lawrence Ho’s business interests were independent from his father’s. ($1 = 1.4468 Australian dollars) (Reporting by Byron Kaye in SYDNEY with additional reporting by Farah Master in HONG KONG; Editing by Himani Sarkar)