Packer Sells Major Stake in Crown Casinos
Primary shareholder of Australia’s Crown Casinos – Consolidated Press Holdings (CPH) – has sold more than half of its stake to Macau-based Melco Resorts and Entertainment. The private investment company, owned by industry mogul James Packer, sold 19.99% of its stake in the casino company. This reduces CPH’s holding to 26%.
The final sale price came to $1.76bn (£1.38bn), meaning that each share’s value is equivalent to about $13. In line with this, CPH’s continuing share in the casino chain is worth around $2.3bn. As such, the investment firm and its owner, Packer, will remain on the board and continue to be an influential force going forward.
”I am still vitally interested in Crown’s success as a world-class resort and gaming business. The sale allows me to continue my long-term involvement with Crown and at the same time to better diversify my investment portfolio.”– James Packer, CEO, Consolidated Press Holdings
Packer said, “Crown has been a massive part of my life for the last 20 years”, and that his involvement in the company going forwards still “represents my single largest investment”.
Potential Problems with Regulators
Although the sale has now been confirmed, it has become clear that certain regulatory organisations have become interested in the deal and will be investigating it thoroughly. Facing the company will be a long process of checks from three different regulatory authorities in Australia.
This is because there are Crown casinos in New South Wales, Victoria and Western Australia, each with licences from the respective authorities for each state. These investigations will aim to determine whether the new shareholders are fit for such an involvement in a casino chain. This is to ensure that all owners and stakeholders in the gambling industry meet the high standards of the regulated industry and are likely to uphold excellence.
The main issue that will be at the heart of any investigation is Stanley Ho’s alleged connection to organised crime and triad gambling in China over the years. Stanley Ho is the father of Melco’s CEO, Lawrence Ho. Stanley’s position as one of the biggest figures in the Macau gambling industry has long been shadowed by the rumours that his business is closely tied to and supported by major organised crime.
His son insists that his own casino businesses have been established as entirely separate organisations from those of his father. As such, he attests that there has been no financial input from his father, nor any influence placed upon the business decisions. It is yet to be seen whether or the regulators will come to the same conclusion.
The central issue is likely to be in New South Wales. When an NSW licence was granted to a new establishment in Barangaroo, Sydney back in 2013, the formal contract conditions of the licence specifically stated that the casino must “ensure that it prevents any new business activities or transactions of a material nature between Stanley Huang Sun Ho or a Stanley Ho associate and Crown, any of Crown’s officers, directors or employees or any Crown subsidiary”.
It is expected that the investigations will take a number of years, and it is quite possible that, in that time, the central figure in the issue will die. Stanley Ho is already 97 years old and suffers from a number of health issues. If the businessman dies before the regulators come to a decision, it is probable that any potential problems with the sale will become irrelevant in the eyes of industry leaders.
The Foreign Investment Review Board will likely also look into the sale, given the extensive property holdings that Crown has in Australia. The Board is yet to publish any remarks on the sale or any future investigations.
Despite the possible concerns over whether or not regulators will be happy with the sale, Ho confirmed that “it is certainly our intention to continue if the opportunity arises to increase our stake in Crown”. It remains to be seen if such an opportunity will arise in the near future.
Packer’s Financial Situation
While it is clear why Lawrence Ho and Melco wish to enter the Australian casino market, it may appear less obvious why James Packer is choosing to sell some of his interest in a company to which he has devoted so much time and money. This is especially the case considering that the US casino operator Wynn was interested.
There are suggestions that the sale-price was also under value, giving fuel to the rumours that Packer had reason to sell quickly. There are some concerns that the Barangaroo site will run wildly over budget and stretch the company financially. In addition, there are signs that the entire venture has misjudged the market. To date, it has been reported that only 25% of the luxury apartments in the resort have been sold. These properties are among the most expensive in Australia; the lack of interested buyers suggests that perhaps the resort has gone beyond the interests of the market.
In addition to these concerns for Crown Casinos, Packer has faced a number of major setbacks in recent years. These includes losses from his attempt to break into Hollywood with Ratpac and his failed attempts to build and open a Crown Casino in Las Vegas. On top of these problems, Packer and his sister decided to split their business interests. This resulted in Consolidated Press Holdings incurring large debts.
In response to such adversities, Packer decided to sell his investments in Macau. Up until 2015, he had worked closely with Lawrence Ho and Melco. It is believed in the industry that the new deal signals a desire on both sides for the two businessmen to once again work closely together on projects. This is potentially the reason for the sale to have gone through quickly, and why Melco was prioritised over other interested parties.