Thu, Jun 23, 9:56am by Staff Writer
In a recently announced de-merger, the Crown Resorts casino empire majority owned by mogul James Packer will divide the bulk of its assets, splitting high-performing Australian properties off from the company’s struggling Asian holdings.
According to Packer, the move has been approved by Crown Resorts’ board of directors, with the overall intent of maximising shareholder value and streamlining the company’s ownership apparatus.
Financial industry experts have lauded the de-merger as a safe, smart play for Crown Resorts, with Bloomberg’s David Fickling equating the decision to a blackjack player splitting a pair of 9s and turning one hand into two.
In essence, Packer and the Crown Resorts board have elected to bundle the company’s steadily productive, but slow-growing, domestic assets together to form a single entity, while creating a more volatile collection of assets in Asian markets like Macau.
The Crown Casino venues in Melbourne and Perth will be joined with London’s Crown Aspinalls property, along with a proposed luxury gambling resort to be located in Sydney, and all related online gambling assets. Effective immediately, shareholders will benefit from the new entity’s relatively steady production of net income-derived dividends, receiving payments based on 100 percent of normalised net profit after tax.
The company’s Asian concerns, primarily the Macau-based Melco Crown Entertainment unit, will be joined with other properties located in the Philippines, along with the Las Vegas development site known as Alon.
The de-merger announcement comes in response to the plummeting rate of gambling revenue in Macau, which has been hammered by regulatory crackdowns as the Chinese government attempts to clamp down on widespread corruption.
Overall, gambling revenue in Macau has dropped off drastically, falling by 34.3 percent to a five-year low of $28.92 billion last year. This came after a similar reduction in 2014. And after reaching a peak of $1.22 billion in annual revenue, Melco Crown Entertainment saw that figure drop to $1.05 billion before falling to just $569 million in 2015.
In a statement, Crown Resorts chairman Robert Rankin outlined the company’s motivation for making the move:
“The board has for some time been looking to address what we believe to be a material undervaluation by the market of Crown Resorts’ assets, due to a traditional consolidated (or amalgamated) structure.
“In particular, we believe that Crown Resorts’ extremely high quality Australian resorts are not being fully valued and the Crown Resorts’ share price has been highly correlated to the performance of its investment in Macau.”
Back in May, Crown Resorts sold off part of its stake in Melco Crown Entertainment for $800 million.
Packer resigned as Chairman of Crown Resorts in August of last year, and despite rumours that he would return as a salaried senior executive, the company has announced that he will not be returning in any official capacity. Instead, Crown Resorts has signed a services agreement with Packer’s private company, Consolidated Press Holdings Group, and he may provide consulting services on occasion.
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