Melco Resorts, the casino group controlled by the Hong Kong magnate Lawrence Ho, says it has abandoned its plans to buy shares in James Packer’s Crown Resorts because of the coronavirus outbreak.
The move, which leaves Melco with its existing 10% stake in Crown, comes as the former New South Wales supreme court judge Patricia Bergin prepares for public hearings into Crown that are set to investigate the original Melco deal.
In May last year Melco agreed to buy almost 20% of Crown from the company’s biggest shareholder, Packer, in a transaction spread across two tranches.
The first 10% was transferred in July but in August Ho and Packer pressed pause on the transfer of the remaining shares until after the end of the Bergin inquiry, which was prompted by a series of media reports making allegations including money laundering at Crown casinos and organised crime involvement in running junkets.
Crown denies all the allegations.
Melco’s decision means it will no longer seek a seat on the Crown board, a move that will avoid scrutiny of its nominee under Australian casino regulator probity rules.
According to research by the ratings agency S&P, Melco faces more danger from the coronavirus outbreak than Crown because it operates casinos in the Chinese territory of Macau, a former Portuguese colony close to Hong Kong.
S&P said Melco “has limited flexibility to absorb a prolonged and severe decline in its cash flow” because it needs money to build an expansion to its Studio City casino in Macau, where casinos have been closed due to the virus.
In a statement released late on Thursday, Melco said that “due to the impact of the coronavirus epidemic, including the severe drop in tourism in Asia to Integrated Resort (IR) facilities in the region, and the recent decision by the Macau SAR government to close all casinos in Macau, Melco has taken the decision to reassess all non-core investments to be made in 2020”.
“As a result of this decision, Melco will not pursue its planned investment in Australia for the second tranche of shares in Crown Resorts Limited.
“While Melco believes Crown has world-class assets that are complementary to its global business, it is Melco’s belief that, at this time, its capital needs to be deployed on its core assets.”
The company said it would focus its resources on projects including extending Studio City and building its City of Dreams Mediterranean casino in Cyprus.
“Management attention will remain focused on these critical areas of Melco’s business until such time as operations and business throughout Asia have returned to normal,” Melco said.
