Don’t bet on buyers lining up for Crown

They are also commercial victims of the reduced number of Chinese tourists now travelling abroad to gamble. They will all be bleeding – Wynn Resorts, Sands, MGM and of course, Melco.

Additionally, all the big gaming companies will be wanting to keep their powder dry and their noses clean ahead of next year’s looming renewals for all casino licences in Macau, which has become the world’s biggest gambling destination.

On top of this, Melco still has the problem of its initial 10 per cent purchase of Crown shares from Packer, which will (presumably) still be a focus of an inquiry by the Independent Liquor & Gaming Authority, even if it decides to drop its investigation into the company’s now-abandoned acquisition of the second tranche of Crown shares.

James Packer is clearly still a seller – but buyers could be thin on the ground or non-existent.

To the extent Melco’s decision was motivated by a desire to avoid some of the regulatory glare from the ILGA, this could backfire. (Melco said it no longer wants a board seat on Crown, but would just be a passive 10 per cent investor.)

Once probity checks have begun, it’s a better look to see them through even if those being checked out don’t wish to proceed with the proposed acquisition of equity in a casino. Genting did this after it applied to increase its stake in Sydney’s The Star even after it had lost the desire to buy more shares.

On Thursday, before announcing it no longer wanted to lift its stake in Crown to 20 per cent, Melco went to the NSW Supreme Court to argue that the NSW gaming regulator had transcended its powers by ordering witnesses in the probe to hand over evidence that breached legal professional privilege. There is a hope that a judgement will be received before the next round of the ILGA inquiry begins on February 24.

Regardless of whatever this legal action means to the inquiry’s terms of reference, it’s highly unlikely to derail the investigation. Melco is at the centre of one aspect of the inquiry’s terms of reference, but there are plenty of other items on the agenda.

The inquiry will examine the vulnerability of casinos to money laundering and the role of junkets and their alleged links to organised crime.

Another leg of the hearings will look into allegations made in The Sydney Morning Herald, The Age and 60 Minutes about Crown’s involvement with money laundering and organised crime.

The final blocks of the inquiry (as it now stands) will look at Melco and the suitability of any close associates, and strengthening future regulation.

But it’s the potential for a stricter rules and the inquiry’s findings around the use of junket operators that will catch the eyes of other international casino operators.

Investing in a company which operates in an uncertain regulatory environment carries plenty of risk.

Wynn was publicly outed last year as being in negotiations with Packer to acquire his stake. There was talk Melco’s walking away may rekindle its interest. But even if it wanted to buy what remains of Packer’s stake  -which will now be 36 per cent – it has Melco sitting on the register now with 10 per cent.

Industry sources said last year that Packer had shopped around his stake to other international operators, but had come up empty until he finally landed a deal with Melco.


If the ILGA inquiry conducted by former Supreme Court judge Patricia Bergin approves Melco’s acquisition of the first tranche of Crown shares,and if Melco and its associates pass probity checks and if Crown gets a clean bill of health, then Ho might try his luck again.

But there are a lot of ifs.

One thing is more certain: The share price pressure on Crown and Star resulting from the coronavirus outbreak will pass. But no-one knows how long this will take, and even if it is contained it will take a lot longer for Australia’s gaming tourism to return.

Perpetual is one large investor that has been rolling the dice on the recovering fortunes of Crown’s share price. It’s been wading into the market and at the end of January increased its holding from 6.08 per cent to 7.09 per cent.

Whichever way Crown’s share price will go, Packer’s plans to further diversity his financial interests away from casinos could take a while to bear fruit.

It looks like he can keep planning the launch of Barangaroo.

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