elco Resorts & Entertainment Limited announced Thursday that due to the impact of the coronavirus epidemic, including the severe drop in tourism in Asia to Integrated Resort (IR) facilities in the region, and the recent decision by the Macau SAR government to close all casinos in Macau for at least 15 days, Melco has taken the decision to reassess all non-core investments to be made in 2020. This includes not going ahead with a deal to buy another bundle of shares in Crown Resorts worth AUD 880 million from James Packer in order to focus on its core business in Asia.
“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,” the company said in a news release.
Core operations, considered by the firm as those businesses where it is the managing and majority shareholder, include 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.
As a result of this decision, Melco will not pursue its planned investment in Australia for the second tranche of shares in Crown Resorts Limited. "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," the company stated.
CPH Crown Holdings Pty Limited and Melco have agreed to terminate the obligation to purchase the second tranche of Crown shares under the purchase agreement announced by Melco on May 30 last year, when Melco agreed to pay Packer AUD 1.76 billion for a 19.9 percent stake in Crown, to be sold in two tranches of 9.99 percent.
The second tranche was put on hold after the New South Wales gambling regulator launched a public inquiry into probity issues around Crown and Melco, including whether the share sale breached the terms of Crown's Sydney casino licence. The licence for Crown's casino under construction at Barangaroo bans Melco boss Lawrence Ho’s father, Stanley Ho, and a number of associated individuals and companies from any involvement in Crown because of a longstanding allegation of links to organised crime.
As a result of the termination, while Melco currently holds 67,675,000 shares of Crown, it will no longer acquire the remaining 67,675,000 shares of Crown. Melco said it does not currently intend to increase its existing shareholding in Crown from its current position, and also that it does not intend to seek representation on Crown’s board.