Casino operator Melco Resorts & Entertainment (MRE) has cancelled plans to purchase additional shares in Australian rival Crown Resorts, claiming its priority is on dealing with coronavirus fallout.
On Thursday, MRE informed investors that it had “taken the decision to reassess all non-core investments to be made in 2020.” The company said its hand was forced by the ongoing spread of the coronavirus, the resulting drop in Asian tourism and the Macau government’s order to close all casinos for at least two weeks.
As a result of this reassessment, MRE said it “will not pursue its planned investment in Australia for the second tranche of shares” in Crown. MRE added that it didn’t currently intend to boost its Crown stake beyond 10% and wouldn’t seek representation on Crown’s board of directors.
MRE agreed to buy a 20% stake in Crown last May but paused this deal last August due to Australian regulators’ discovery that MRE CEO Lawrence Ho held director positions at companies linked to his father Stanley Ho. The terms of Crown’s deal to build a Sydney casino require it to have no dealings with companies associated with Stanley.
On Wednesday, MRE filed a legal challenge of New South Wales’ gambling regulator’s request for certain documents regarding the Crown deal. On Thursday, Aussie media reported that NSW Supreme Court Justice Christine Adamson had listened to both sides’ arguments but didn’t issue an immediate ruling, although she acknowledged there was “some urgency” to resolve the dispute.
MRE’s Thursday notice said it continued to believe that Crown held “world-class assets that are complementary” to MRE’s operations. But MRE needs to focus on its own operations in Macau, Manila and Cyprus, while also pursuing a Japanese casino license, “until such time as the global health emergency and the related travel restrictions that affect a significant part of its customer base are lifted.”
Investors seemed to appreciate MRE’s announcement, as its shares are currently up 2.4% on the Nasdaq exchange, while MRE’s parent company Melco International Development saw its shares rise 5.4% on the Hong Kong exchange.
