Tue, Sep 3, 1:54pm by Staff Writer
The New South Wales Independent Liquor and Gaming Authority inquiry into Crown Resorts will examine whether James Packer’s sale of two stakes in the business to Lawrence Ho constitutes a breach of the casino group’s licence to operate its casino at Barangaroo in Sydney.
The AFR reports the terms of reference for the ILGA inquiry, which will be headed by Patricia Bergin, were released on Thursday, just hours after Mr Packer and Mr Ho’s company, Melco International said they had agreed to hit pause on the second tranche of their share sale deal.
Mr Ho purchased the first tranche of 67.9 million shares in Crown – just under 10 per cent – in early June and was due to complete the purchase of the second identical tranche by September 30.
But Mr Ho and Mr Packer have agreed to delay that second deal “to allow more time for the relevant Australian regulatory processes to be completed.”
The ILGA said Ms Bergin would be asked to look at “whether or not the disposal of shares held by CPH in Crown Resorts to Melco …on or around June 6, 2019 constituted a breach of the Barangaroo restricted gaming licence or any other regulatory agreement.”
The inquiry will also look at whether Melco and Mr Ho, who is one of a number of Melco representatives that could join the board of Crown following the share purchase, are of “good repute, having regard to character, honesty and integrity” and “have any business association with any person, body or association who is not of good repute.”
Crown shares fell 1.36 per cent to $12 in late afternoon trade on Friday.
Mr Ho’s father, Stanley Ho, holds a stake in Melco, and is banned from being a close associate of Crown under the current terms of the Barangaroo licence.
Crown Resorts said in a statement on Thursday that it was “considering the terms of reference and will fully cooperate in relation to the inquiry.”
The inquiry will also examine allegations raised in a series of reports by Nine Entertainment Co outlets about the links between criminal organisations and the junket operators who bring wealthy Asian gamblers to Crown’s Australian casinos.
The ILGA inquiry will be asked to “undertake a forward-looking assessment of the Authority’s ability to respond to an environment of growing complexity of both extant and emerging risks for gaming and casinos.”
@911CORLEBRA777 August 8 2019 – the New South Wales Independent Liquor and Gaming Authority will conduct an inquiry into James Packer's sale of his stake in Crown Resorts to HK-based casino operator, Lawrence Ho's Melco Resorts and Entertainment Ltd. https://t.co/HJ99hCsUSj
— Kath (@mopeng) August 8, 2019
Mr Ho’s purchase of a 19.99 per cent stake in Crown also needs to pass probity checks from regulators in New South Wales, Victoria and Western Australia.
The pause of the second tranche sale means Crown investors hoping Lawrence Ho may eventually consider a takeover bid for the company will have to be patient.
Mr Ho has previously indicated his desire to grab an even bigger slice Crown over time.
Wilson Asset Management portfolio manager John Ayoub says that is now unlikely to happen for some time.
“The intent is still there, Melco is just going to have to be patient,” he said.
“They’re going to take a longer view and wait for regulatory approvals before they consider any longer-term ambitions.”
One analyst said Mr Ho was smart to delay the purchase of the second tranche of 67.9 million shares at this point.
If the regulatory outcomes go against Melco or Crown, Mr Ho would have become the forced seller of an even bigger chunk of Crown stock had he moved to 19.99 per cent of the company.
Under the terms of the new agreement between Melco and CPH, the parties will have 60 days from the completion of the regulatory processes to complete the sale of the second tranche of shares.
If the deal is not completed by May 31, 2020 – a deadline that can be extended by six months by either party – then the deal can be terminated by Melco or Mr Packer.
The agreement also states that the price Mr Ho pays for the second tranche will be reduced by the amount Mr Packer receives from any Crown dividends during the extension period.
In a statement, Mr Packer’s Consolidated Press Holdings said that while it “does not consider there has been any breach of agreement, licence condition or legislation in connection with the subject matter of the transactions with Melco, it has taken this step in agreement with Melco so the regulatory processes and ILGA Inquiry can proceed in an appropriate manner.”
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