Melco gains momentum for Japan

After it announced it acquired a 19.99% stake in Crown Resorts, Melco seems to have improved its chances in Japan as the casino industry gets closer.

Japan.- Melco Resorts and Entertainment acquired almost a 20% stake in Crown Resorts. According to several brokerages, the deal may lead to improved chances to land an integrated resort licence in Japan.

“While Melco will utilise some debt capacity to fund it share purchase, we do not see this as an impediment in Melco’s Japan bid,” said Sanford C. Bernstein Ltd analysts. “In fact, owning an Australian operation may help enhance Melco’s standing in the bid process,” they added.

“With our focus on the Asian premium segments, high quality assets, dedication to world-class entertainment offerings, market-leading social safeguards and compliance culture and our commitment to being an ideal partner to local governments and communities alike, we believe Melco is in a strong position to help Japan realise a vision for an integrated resort development with a unique Japanese touch,” Melco Chairman and CEO Lawrence Ho recently said.

According to Nomura’s Instinet, the move “increases Melco’s chances in Japan.”

“We view Melco’s transition toward a fully international entertainment resort company as helpful to its stock multiple and beneficial for its competitive bid for a casino concession in Japan,” the brokerage explained.

The acquisition

Melco announced on Thursday that it reached a purchase agreement that specifies that one of its subsidiaries will acquire 135.35 million shares of Crown Resorts Limited from CPH Crown Holdings Pty Limited (CPH) for a price of €8 per Crown share.

As detailed by the company, the shares represent an ownership interest of approximately 19.99% in Crown. The transaction will close in two equal tranches on June 6, 2019, and on or prior to September 30, 2019.

This deal doesn’t actually require regulatory approval to be completed. However, Lawrence Ho and selected executives said that they will submit applications to the gaming regulatory authorities in Victoria, Western Australia, New South Wales and any other relevant jurisdictions.

Lawrence Ho said: “I view Melco’s investment in Crown as an incredible opportunity to purchase a strategic stake in what I believe to be Australia’s premier provider of true integrated resort experiences. Crown’s Resorts in Perth and Melbourne are world-class entertainment destinations and I believe that Crown Sydney, much like Melco’s Morpheus property, will create an architectural icon for the city, the country and the world. In addition, Crown’s UK assets have qualities that are second to none.”