Melco Resorts is delaying its purchase of $880 million worth of Crown Resorts shares from billionaire James Packer.
Packer agreed to sell $1.76 billion shares in Crown Resorts to Lawrence Ho, CEO of Melco Resorts, in May. The sale reduced Packer’s holdings in Crown Resorts to 26 percent, valued at $2.3 billion at the time. Ho already has half of the 135.5 million shares agreed in the sale, with the other 50 percent due to close on September 30th.
That deadline now looks extremely unlikely after Melco Resorts put the deal on ice. Lawrence Ho, the CEO of Melco Resorts, and Packer want to wait until the New South Wales (NSW) Independent Liquor & Gaming Authority (ILGA) completes its review of the deal.
Packer’s Company Agrees With Melco Resorts to Pause the Deal
Consolidated Press Holdings (CPH) released a statement this week about the decision to put the deal on hold.
“While CPH does not consider there has been any breach of agreement, licence condition or legislation, it has taken this step in agreement with Melco so the regulatory processes and ILGA inquiry can proceed in an appropriate manner.”
CPH also revealed the deal will only go ahead if Melco received written notice from the three states in which it has a casino. NSW, Victoria and Western Australia’s regulators need to deem Lawrence Ho a “suitable person” for running a casino. Either CPH or Melco can terminate the deal if this condition is not met by May 31st, 2020.
Ho Family Linked With Organised Crime
Pokies.com revealed in May that Melco Resorts’ purchase of Crown stock was under investigation. Now Packer and Ho have decided to allow the NSW ILGA to run their eye over the deal before completing the share transfer.
NSW ILGA began looking into the deal due to Ho’s father being the infamous Stanley Ho. Stanley Ho, 97-years-old, has long been associated with organised triad crime networks. The Ho family strenuously deny any links to crime.
Shares in Crown Resorts fell to $11.49 per share on the back of this news. They are now trading at $11.95 per share having recovered slightly.
Lawrence Ho, one of Stanley Ho’s 17 children to four wives, stresses his business dealings are separate from his father’s.
“Both Crown and I have always stressed that my business dealings are independent of my father’s interests. We have already been in partnership with Crown for 12 years and have passed probity screen from regulators without an issue.”
Agreement With NSW ILGA Under the Spotlight
One of the main reasons NSW ILGA is involved is an agreement signed by Crown representatives in 2014. Crown is currently building a $1.5 billion Crown Sydney complex, which is due to open in 2021. The company agreed to refrain from doing any business with Stanley Ho as part of the agreement. Crown also agreed to not do business with 55 companies and five individuals linked to Stanley Ho.
Officials of the NSW ILGA learned Lawrence Ho was on the board of directors of Lanceford Company Ltd, one of the blacklisted companies. He held this position until June 28th, way after agreeing the $1.76 billion share purchase.
Ho Jr. claims he is always happy to go through the regulatory process and prefers jurisdictions where there are strong governance and a strong regulatory regime.
Latest financial figures for Melco showed a 50.6 percent increase in profit to HK$1.6 billion (A$303,112 million) despite heavy investment.
A $1.1 billion luxury hotel called Morpheus opened in June 2018 and Melco is also expanding into Europe. City of Dreams Mediterranean should open in 2021, Cyprus Casinos opened in Limassol. Two more satellite casinos are opening in Paphos and Ayia Napa before the end of 2019.