Crown Resorts Ltd. will spin off its international investments, including a $2 billion stake in Macau casino operator Melco Crown Entertainment Ltd., as controlling shareholder James Packer seeks to shield his Australian assets from a prolonged downturn in the Chinese gambling hub.
The newly listed entity is also set to house Crown’s development site in Las Vegas, a 20 percent stake in Japanese restaurant Nobu and half of U.K. casino operator Aspers Group, the Melbourne-based company said in a statement Wednesday. The gaming firm has a 27 percent stake in Nasdaq-listed Melco, where profit has plunged to a sixth of its 2013 peak amid Macau’s two-year gambling slump.
“This new corporate structure, well positions Crown for the next decade as we continue to grow our business and meet the needs of the emerging Asian middle class,” Packer said in a separate e-mail statement. The billionaire, who has a net worth of $3.4 billion, will remain deputy chairman of Melco.
Chairman Robert Rankin said the split was designed to isolate Crown’s Australian casino business from the wider group, which he said investors undervalued because of a gambling downturn in Macau. Shares in Crown, which is controlled by Packer’s closely-held investment company Consolidated Press Holdings Ltd., have tumbled more than 30 percent since January 2014.
The newly separated international business “will be set up as a growth asset and probably be given a reasonable-sized war chest to expand in Asia and Las Vegas,” Evan Lucas, a market strategist at IG Ltd. in Melbourne, said by phone. “The Australian assets are humming along nicely enough, but you would not describe them as a great growth story.”
Macau Drag
Shareholders led by Packer will own equity in the new international entity proportionate to their Crown stakes, the company said. After the spinoff, Crown would hold gambling resorts in Melbourne, Perth and a planned luxury hotel-casino in Sydney. London casino Aspinalls and online gaming operations such as CrownBet would also be part of Crown.
“The proposed demerger reflects the different nature of Crown Resorts’ controlled Australian operating assets from its international investments,” Rankin said in the statement. “The Crown Resorts share price has been highly correlated to the performance of its investment in Macau.”
Gambling revenue in the southern Chinese territory of Macau has been hurt by government curbs on illicit money flows and a campaign against corruption that deterred VIP players. In May, Crown sold an $800 million stake in Melco.
Melco said it is strongly supported by its largest shareholder Melco International Development Ltd. and other investors and does not anticipate any impact “in any respect, including management, strategy and operations,” according to a statement in response to queries about Crown’s spin off.
Privatization Talks
That sale revived speculation that Packer was preparing to buy back some gaming assets in Australia. Last year he held talks with private-equity firms and pension funds about a possible buyout of Crown assets, people with knowledge of the matter said in December.
Rankin said Wednesday that Crown has “great faith in the long-term development of the Macau market.”
Crown, which has a market value of A$8.2 billion ($6 billion), said as well that it will explore a potential initial public offering of 49 percent of a property trust that would hold its Australian hotels, apart from Crown Towers Melbourne.
Crown Resorts is working with Deutsche Bank AG, Morgan Stanley and UBS Group AG on the proposed property trust IPO, according to people with knowledge of the matter, who asked not to be identified as the information is private. A representative for Crown Resorts said she couldn’t immediately comment.
At the same time, Crown plans to implement immediately a policy to return all of its net income to shareholders through dividend payments, the company said.