Fri, Jun 28, 2:22pm by Staff Writer
Melco Resorts could afford to pay $14 a share for Crown Resorts and come up with a positive financial outcome, the Australian Financial Review reports.
That’s the view of Macquarie analysts on Tuesday morning, following an in-depth look at both companies and why the deal could make sense for both sets of shareholders.
Macquarie said the deal was “unappreciated” when it came to Melco’s investors, but backed the strategic merit.
“While investor reactions to a Melco-Crown tie-up have generally been negative, we do see the strategic rationale behind the transaction and believe investors are misunderstanding revenue synergy potential while over discounting Crown growth opportunities that are up to three years out,” Macquarie’s team told clients.
The analysts reckon Melco could make its move in about 12-months, which is the same timeframe it could take to get probity clearance in Australia.
And they say a deal at $14 per Crown share would be free cash flow neutral to Melco – based on “only” $US30 million in cost synergies and no revenue synergies.
The former regulator who rubber-stamped a Sydney casino licence for Crown Resorts says a fresh probity check of new shareholder Lawrence Ho is warranted.
Human rights lawyer Chris Sidoti, who was appointed the chair of the New South Wales Casino, Liquor and Gaming Authority in 2008, oversaw a 2014 agreement with Crown that specifically prevented the gambling company from any association with Lawrence’s father, Asian casino tycoon Stanley Ho.
Stanley Ho has previously been linked to Asian organised crime, but has strenuously denied such suggestions and has never been convicted of any offences.
The 2014 VIP Gaming Agreement approved by the subsequently renamed Independent Liquor and Gaming Authority stated that Crown must prevent “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.”
The agreement’s definition of an associate extends to “any additional entities or identified individuals who, from time to time, the authority may notify Crown are to be considered associated of Stanley Huang Sun Ho.”
Mr Sidoti told the AFR that while no links between Mr Ho’s company Melco Resorts and Stanley Ho could be found at the time, the provisions provided an extra measure of caution for the state government, as the Ho family declined to provide information about the role of Stanley Ho in the family’s wider business interests.
Melco could pay as much as $14 a share to take over Crown Resorts, valuing the company at $9.32 billion, in a deal that Macquarie says makes “strategic sense”. https://t.co/DjMv5OZrvw
— Business Review (@aus_business) June 25, 2019
“We had no evidence at the time there was a commercial association between Lawrence and Stanley Ho.”
“We just wanted to make sure the arrangements as we understood them were going to persist,” Mr Sidoti said of the reason for the provision.
In 2014, Crown’s position as a major Melco shareholder dragged the Ho family into the NSW regulatory probe.
Crown completed its exit from the Melco register in 2017.
Mr Sidoti said it was right that Melco’s purchase of a 1999 per cent stake in Crown from James Packer on Thursday night should trigger a new review of Crown’s arrangements in New South Wales.
“This does represent a material change in the circumstances of Crown and any material change needs to be reviewed.”
Mr Ho and Melco must also clear probity checks in Victoria and Western Australia, where Crown operates its casinos, before the $8 billion company can make room for a Melco representative on its board.
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