Melco Resorts and Entertainment has abandoned its plans to acquire a second tranche of shares in Australian casino operator Crown Resorts amid an ongoing inquiry into Melco’s Australian interest by the New South Wales Independent Liquor and Gaming Authority.
The tranche, comprising a 9.99% stake in Crown, relates to an agreement signed between Melco and majority Crown shareholder CPH Crown Holdings Pty Limited – controlled by James Packer – to acquire a combined 19.99% stake across two separate and equal transactions. Melco acquired the first tranche of 67,675,000 in June 2019.
In a statement issued late Thursday, Melco said it will no longer pursue its planned investment in Australia for the second tranche of shares in Crown Resorts, with Melco and CPH Crown Holdings Pty Limited having agreed to terminate the obligation to purchase the second tranche.
The decision comes on the same day as reports emerged in the Australian media that Melco had filed a legal challenge against the NSW Independent Liquor and Gaming Authority in which it argued that the regulator was exceeding its authority by launching an inquiry into its acquisition of a 19.99% stake in Crown.
However, Melco on Thursday attributed the decision to limit its Crown interest to the impact of the Coronavirus and subsequent need to focus on its existing properties across Asia.
“Due to the impact of the coronavirus epidemic, including the severe drop in tourism in Asia to Integrated Resort 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,” the company said.
“This decision reflects Melco’s commitment towards its employees, customers, business partners and other stakeholders and observance of the highest degree of responsibility until such time as the global health emergency and the related travel restrictions that affect a significant part of its customer base are lifted.
“Melco considers its core operations to be those businesses where it is the managing and majority shareholder. This includes operations in Macau, the Philippines, and Cyprus and its efforts to obtain a license to operate a Melco-owned IR in Japan.
“Melco intends to continue its operations in these jurisdictions and carry out key investments currently earmarked for Macau, Manila, Cyprus, and Japan, including the construction of Studio City phase 2 and City of Dreams Mediterranean. 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.
“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.”
While Melco will retain its initial 9.99% stake in Crown, it added that it will no longer seek representation on Crown’s board.