Casino operator Melco Resorts & Entertainment (MRE) has paused its acquisition of a major stake in Australian rival Crown Resorts pending the results of a regulatory probe into the deal.
On Wednesday, the Hong Kong-listed MRE and the ASX-listed Crown announced that they had agreed to “allow more time for the relevant Australian regulatory processes to be completed” before MRE pulled the trigger on the second half of its purchase of a 20% stake in Crown.
MRE took possession of the first half of these shares on June 6 and was scheduled to gain control over the second tranche on September 30. The two parties have now agreed to defer this closing for up to 60 business days beyond that deadline.
Should the second tranche closing occur after September 30, MRE’s purchase price will be reduced by an amount equal to any dividends received by Crown through its continued ownership of the shares.
The sale was given a sunset date of May 31, 2020, with a possible six-month extension exercisable by either party. However, if the sale doesn’t conclude on schedule, the sale can be terminated by either party.
The Aussie ‘regulatory processes’ referred to above include the probe launched earlier this month by the New South Wales Independent Liquor & Gaming Authority (LGA) into the deal MRE announced in May to acquire 19.99% of Crown from the latter company’s founder James Packer.
The LGA’s probe was sparked by a damning 60 Minutes Australia report alleging impropriety in Crown’s dealings with its Chinese VIP gamblers and the junket operators who steer those VIPs to Crown’s doors. Crown has vigorously pushed back against the allegations but the public relations hits just keep on coming.
More recently, the Australian media’s joint investigation alleged that, until June 28, MRE boss Lawrence Ho was a director of a company with which Crown was forbidden to associate. The company, Lanceford Company Ltd, held assets formerly belonging to Ho’s father Stanley Ho, whom Aussie regulators have linked with Hong Kong’s triads.
Lawrence Ho has consistently denied any involvement in his father’s business and Sanford C Bernstein analysts strongly believe that Lawrence will emerge from the probe untainted and that the Crown deal will go ahead as planned. The analysts further suggested that Ho will eventually buy out Packer’s remaining stake in Crown, which would boost Ho’s share to controlling 46.8%.
