Some time ago, business tycoon James Packer, the person behind Crown Resorts and casino magnate Lawrence Ho, Chairman and CEO of integrated resort developer and operator Melco Resorts & Entertainment officially announced their decision to separate the two companies. As a result, Mr. Packer started to sell Crown Resorts’ shares in Melco Resorts & Entertainment. According to reliable sources, the demerger came at a high price for Crown Resorts and its investors, who lost approximately $2.5 billion thus far.
As if that is not enough, Mr. Packer’s company lost its position on the global gambling market as the company will not participate in the construction of Europe’s biggest casino complex in Cyprus. Last week, the €500-million Cyprus casino project received the go-ahead for its construction. The premier gambling center is to target Russian, British and Middle Eastern high-rollers.
Moreover, it is not a secret for anyone that the casino tycoon Ho expressed his interest in expanding his business beyond the family turf. Mr. Ho plans to enter the untapped Japanese gambling market, which has the potential to be worth billions. Logically, Ho’s ex Australian business partner closed one more door for Crown Resorts on the global scale. Another important fact is that Ho’s gambling empire is the leader in the gambling enclave of Macau. In that sense, Crown Resorts narrowed its exposure on the global gambling scene even more.
Crown Resorts Makes the Wrong Move
Even though Crown Resorts has been a thriving gambling company in Australia for years, Crown’s demerger from Melco tightened the rope around the neck of the Australian company, which is still trying to recover from the scandal related to the illegal promotion of gambling services in China.
In a newspaper interview last year, Mr. Packer expressed his disappointment with the situation, even though the company has pocketed $3 billion from selling its shares in Melco. Crown owned a 34.3% stake in the Melco Crown Entertainment joint venture. In 2016, Crown sold a big portion of its stake in Melco at a price of $15.50 per American depositary share. Crown Resorts started to share its shares in the company at a time, when Melco’s shares hit the bottom.
Since then, the market value of Melco Resorts & Entertainment has risen from the ashes. Mr. Packer’s disappointment is explainable as only one-third stake in Melco is worth almost $6 billion, which is almost half the price of Crown Resorts on the stock market. In other words, Mr. Packer’s move to divest his interest in Melco appeared to be the wrong turn for his company and its investors.