Packer cuts Macau stake, stoking Crown buyout speculation

[HONG KONG] Crown Resorts, the gaming company of James Packer, sold US$800 million worth of shares in its Macau venture, raising speculation the billionaire is increasing his firepower for a potential purchase of Australian casino assets.

Crown is selling the stock back to Melco Crown Entertainment, cutting its stake in the company to 27 per cent from 34 per cent, it said in a statement late Wednesday. Mr Packer will resign as co-chairman of Hong Kong-based Melco Crown and become deputy chairman.

Crown is reducing its commitment in Macau as the world's largest gaming hub endures a downturn, despite saying last year the company had "great faith" in the territory.

Mr Packer last year held talks with private equity firms and pension funds about a possible buyout of some Crown assets, people with knowledge of the matter said in December.

"I'd say there's definitely something lurking in the background," said Sam Fimis, a wealth adviser at Patersons Securities in Melbourne. Cash from the stock sale gives Mr Packer more options, he said.

Crown shares climbed 3.1 per cent to A$12.19 in Sydney trading, giving Crown a market value of A$8.9 billion (S$9 billion). The stock is down 8.7 per cent in the past 12 months.

SHAREHOLDER RETURN

Crown said in its statement that after the stock sale it would consider a potential return to shareholders. The proceeds would initially be used to cut net debt, it said.

"Crown will assess its capacity to make a distribution to shareholders, and at the same time maintain a strong balance sheet and credit profile to fund existing Australian development projects, including Crown Sydney," it said, referring to a planned casino and hotel complex on Sydney harbour's foreshore.

Melco will buy back 155 million ordinary shares from Crown's wholly-owned Crown Asia Investments at US$5.1667 per share, according to the agreement.

"Crown remains a major shareholder in the company and we look forward to continuing our relationship," Lawrence Ho, Melco's co-chairman with Packer and the Macau casino operator's chief executive officer, said in a separate statement.

Gambling revenue in Macau fell for a 23rd straight month in April, hurt by China's slowing economy and a government crackdown on graft.

MACAU DOWNTURN

Melco, part-owned by billionaire Ho, the son of Macau gaming mogul Stanley Ho, in October opened the Hollywood-themed US$3.2 billion Studio City resort that features a giant Ferris wheel and virtual Batman ride. Macau casino operators are seeking to draw more tourists as the anti-graft campaign scared off Chinese VIP players.

Melco Leisure & Entertainment Group will become the single largest Melco shareholder after the repurchase, which was made at a 1.6 per cent premium to the Tuesday closing price of the American depositary shares, the company said.

Crown executive vice-president Todd Nisbet will also resign as Melco's director, with its board then comprising of three Melco representatives, two Crown nominees and four independent directors with Mr Ho as chairman, it said.

Consolidated Press Holdings, Mr Packer's closely held investment vehicle, owns 53 per cent of Crown, according to data compiled by Bloomberg.

The billionaire in August stepped down as the Australian company's chairman to focus on developing the company's new projects, which include a casino being developed in Las Vegas and a hotel for high rollers on the Sydney harbour.

Melco Crown on Wednesday reported first-quarter revenue of US$1.1 billion, a 5 per cent increase from a year earlier. That compared with analysts' estimates of US$1.15 billion.

The company attributed the growth to Studio City, which started operations in Macau in October, as well as City of Dreams Manila, which began last February. Those gains helped offset lower revenue at both City of Dreams and Altira Macau, it said.

BLOOMBERG