James Packer is effectively handing Crown Melco to his venture partner, Lawrence Ho. Photo: Kin CheungJames Packer’s annus horribilis is now complete with his casino operation, Crown Resorts, announcing a comprehensive retreat from its global ambitions to focus on the much safer Australian market.
Make no mistake, Crown’s boring old Australian business is now the main game.
“This transaction will enable investors and analysts to more easily evaluate the financial and operating performance of the company’s high quality core Australian assets,” said Crown chairman Rob Rankin.
Crown announced that it will be cashing out of the world’s largest gambling market, Macau, by almost halving its Asian expansion vehicle, Melco Crown, to a minor stake that might soon be sold.
Packer will leave the Melco Crown board which will now be controlled by his local business partner, Lawrence Ho, who will buy Crown’s shares for as much as $1.6 billion.
Crown said it is looking at options to “monetise” its remaining stake, without offering further detail.
The announcement comes one day after the Japanese government legalised casinos in its country for the first time. Melco Crown was meant to be the spearhead for Packer’s entry to that market, expected to become one of the most lucrative in the world.
Packer’s latest ambitions in Las Vegas, the Alon project, have also been scuttled with Crown announcing it is looking at options to “optimise the value” of this investment, “including an outright sale”.
However, it appears that a retreat from Macau will not completely protect Crown from the China fallout following the detention and subsequent arrest of 18 of its employees in October.
Crown reported on Thursday that gambling revenues at its Australian casinos have gone backwards by 12 per cent for the December half year to date “due to the reduction in VIP program play revenue during this period,” which has almost halved.
Crown’s China-based employees have been charged with “gambling crimes”, which relate to the company allegedly marketing its casinos to local high rollers. The significant fall in revenue may signal that Chinese high rollers have been scared off from Crown’s casinos even here in Australia.
Crown has also abandoned the planned company split it announced in June, but it is still planning to go ahead with a sharemarket listing of its local property assets.
To shore up the mothership, Crown will use the proceeds from the sale of its Melco Crown stake to pay down debt by $800 million, buy back $300 million worth of shares and sweeten shareholders’ Christmas with a “distribution” of $500 million.
Around half of this amount, up to $250 million, will flow back to Packer himself who is still extracting himself from a very public breakup from pop diva Mariah Carey that promises to be as expensive as his first divorce.
His retirement from the Melco Crown board removes Packer from any public role and leaves him isolated from what is now the core of the Crown business. Packer is based between Los Angeles – the home of his Ratpac movie production business – and Israel.
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