Melco thinks twice about Crown deal
In June last year, Crown Resorts was still reeling from the crushed deal that would have seen Wynn Resorts acquire the company.
Casino Aus reports that Melco Resorts and its chief executive officer, Lawrence Ho, came forward with an offer to buy a 20 per cent stake in Crown from James Packer.
That offer was welcomed until this month, when the deal disappeared.
Melco rescinded the offer and blamed the recent coronavirus outbreak.
Melco made its offer to expand its business into Australia with a strong foothold.
It was willing to pay $1.76 billion for a 20 per cent stake in Crown Resorts, with the possibility of buying more over time.
James Packer, who had been wanting to offload some of his share in the company in a nod toward semi-retirement, was all in.
He snap-called the deal.
The initial part of the transaction closed on June 6, 2019.
The companies hoped the deal would be finalised by the end of September, pending a regulatory investigation by New South Wales’ government.
Mr Ho went about applying for gaming licences in New South Wales, Victoria and Western Australia, with an eye towards Melco’s expansion.
It all seemed like a positive long-term deal for both companies, with the exception of the scrutiny the deal would soon come under.
Little more than two months after the companies announced their hopeful partnership, Crown came under fire via a media investigation by three prominent Australian media outlets.
The allegations were wide-ranging in that Crown reportedly participated in or knowingly allowed money laundering, sex trafficking and other criminal behaviour at its casinos.
Ultimately, the investigation tied Crown to a powerful criminal syndicate in China.
Members of that criminal organisation would travel to Crown casinos in Australia via fast-tracked visas, and junkets delivered them to the steps of Crown properties.
All the while, Crown allegedly looked the other way.
And then there was Ho, son of famed and alleged member of a Chinese crime syndicate Stanley Ho.
While Ho avoided any criminal prosecutions throughout his life, Australian businesses notoriously stayed away from doing business with him because of his reputation.
Therefore, his son’s desire to enter Australian territories in casino business did more than raise a few eyebrows.
The New South Wales Independent Liquor and Gaming Authority was first to launch an investigation into the proposed Crown-Melco deal.
VIP casino in Sydney
The primary reason was that Crown had been recently authorised to build its massive Barangaroo project, complete with a VIP casino.
Part of that agreement with New South Wales was a clause that prohibited “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.”
That seemed to be a fairly clear deal-breaker, but the investigation went on for months without any final conclusion.
Meanwhile, Melco put a brief hold on the deal, but gave every indication that it wanted to finish it.
The New South Wales inquiry didn’t officially begin until last month and it wasn’t going well.
As the New South Wales Supreme Court demanded documents for its investigation, Melco balked, saying company documents were privileged and would not be submitted.
All of this prompted Melco to say that it no longer wanted to eventually acquire a 50 per cent share of Crown.
The 20 per cent under scrutiny would suffice.
Coronavirus causes Melco to rethink
On February 6, Reuters reported that Melco withdrew its offer for the 20 per cent stake purchase in Crown Resorts.
The reason given was a plunge in the number of travellers and the increase in casino closures.
Both are a result of coronavirus’ spread around Asia.
Not only did the dangerous and sometimes-deadly virus prompt Macau to close all of its casino for several weeks, it has hit the casino industry as a whole in the region very hard.
People are afraid to travel, spend time in public places and put themselves in potential danger.
Approximately 90 per cent of Melco’s revenue comes from Macau, and the company will have to figure out how to make up for lost casino revenue due to the coronavirus outbreak.
In addition, Melco has invested resources into a Studio City extension and its new City of Dreams Mediterranean casino property in Cyprus.