Sat, Dec 17, 9:15am by Senior Writer
Analysts and the market have reacted positively to James Packer’s surprise decision to abandoned Crown’s push into Asia and the United States.
Packer, currently in Argentina, orchestrated a spectacular retreat in his global casino ambitions this week with Crown Resorts, the flagship company of which he controls 48 per cent, selling out its stake in the Melco Crown joint venture.
The joint venture had built casinos in Macau and the Philippines over the past 12 years, growing the global footprint of Packer’s gambling empire significantly.
But with uncertainty in the Macau market still rife after a Chinese government crackdown on corruption, plus the detention of 18 Crown Resorts staff in China, Packer has exited the Asian market and also scrapped plans for a massive casino development in Las Vegas.
While the market was taken by surprise by the sudden move, especially when Crown Resorts shares went into a trading halt on Thursday, they rebounded strongly when the market opened on Friday.
From Wednesday’s $11.40 close, Crown leapt to $11.70 with an hour of opening on Friday and while it had fallen back down to $11.44 by the time the markets closed for the week, there was clearly plenty of faith in Packer’s vision.
That faith was backed up by analysts, who described the decision as extremely prudent in the current market.
“He is selling the family silver,” one well-placed source of the Melco deal told the Australian Financial Review. “This is not erratic behaviour though. This is a completely rational and sensible move.”
“Once the spin-off failed, Plan B was always to sell out. No-one really knows what the impact on VIP revenues will be and they needed to raise money. The China thing is really worrying.”
The spin-off referred to was the demerger of Crown’s international and Australian assets, which was announced in June, but never had a chance to eventuate.
Packer has endured a turbulent personal and professional year, spending much of the past few months in South America in retreat after the failed relationship with high-profile musician Mariah Carey.
But it is believed with his Crown Resorts’ business growth firmly focussed in Australia, where construction of the Sydney casino at Barangaroo is well underway, Packer is expected to spend much more time in Australia in 2017.
“What they are doing is the right way forward. They need to degear the balance sheet ahead of the capital project that is coming in Sydney,” Perpetual’s head of Australian equities, Paul Skamvougeras told the AFR.
Cashing out his Melco chips after 12 years ensured a profitable end to the relationship.
Packer’s father Kerry orchestrated a deal where Publishing & Broadcasting spent $211 million taking a 50 per cent stake in the joint venture in 2004 just 12 months before his death.
The sales this week have already reaped $2.6 billion and left Crown with 11.2 per cent of their original stake in the Macau casino business.
Melco Crown shares on the Nasdaq were $17.31 before the news broke this week, and immediately slumped to $16.38 on opening on Thursday. They hit a low of $16.02 late on Friday US time.
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