Blackstone Gobbles Up 10 Percent of Crown Resorts, Melco Sells Stake at Big Loss

Posted on: April 29, 2020, 08:54h. 

Last updated on: April 29, 2020, 10:16h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Private equity colossus Blackstone (NYSE:BX) continues forging into the gaming business. The company is taking a nearly 10 percent stake in Australia’s Crown Resorts, and is getting those shares from Melco Resorts & Entertainment (NASDAQ:MLCO) at a deep discount.

Blackstone Buying Share Of Crown Resorts
Blackstone is buying 10 percent of James Packer’s Crown Resorts from Lawrence Ho’s Melco on the cheap. (Image: Reuters)

The private equity firm is paying $360 million for all of the Crown shares previously held by the Macau operator, meaning Melco sold that equity at prices that were 37.3 percent below what the company paid for the stock last year.

Blackstone paid the equivalent of $5.31 a share for 67.67 million Crown shares. Last year, Melco doled out $8.42 a share for its stake in the Aussie gaming company controlled by James Packer. The relationship between Lawrence Ho’s Melco and Packer’s Crown became frayed, as media reports surfaced in 2019 indicating that Ho may have been involved with a company barred from doing business with Crown.

Earlier this year, the Australian state of New South Wales (NSW) launched an investigation into Crown’s licensing suitability for a Sydney gaming project. Much of that inquiry focusing on the operator’s relationship with Ho.

Saved by the Virus

By February, the coronavirus was adversely impacting the Asia-Pacific gaming industry, giving Melco a plausible excuse to scrap the Crown deal.

Like other gaming companies, the City of Dreams operator is searching for more cash, and the sale of its Crown stake, albeit at a loss, is an easy avenue for bolstering its balance sheet. In a recent regulatory filing, Melco said it has little visibility regarding when business will return to pre-virus levels in Macau.

Amid plunging traveler numbers because of curbs imposed to contain the new coronavirus, Melco scrapped its planned purchase of a second 9.99% stake in Crown from billionaire James Packer in a deal that had already raised regulatory concern,” reports Reuters.

Melco’s sale represents the latest in an ongoing saga for Crown investors, one that also included a brief 2019 flirtation with a takeover offer from Wynn Resorts (NASDAQ:WYNN).

More Real Estate for Blackstone

For Blackstone, the deal isn’t as much about potentially making a play to acquire Crown outright, but rather, finding ways to extract value from the gaming company’s enticing real estate assets.

Blackstone, the owner of the Cosmopolitan Las Vegas, is a growing force in the casino real estate business, recently acquiring the Bellagio from MGM Resorts International (NYSE:MGM) and partnering with MGM Growth Properties (NYSE:MGP) to purchase the real estate of Mandalay Bay and MGM Grand.

Crown’s Australian property assets are valued at just over $3 billion. Those include Crown Melbourne and Crown Perth. The company also owns Betfair Australasia, half of Aspers Group, and a 20 percent interest in Nobu, the posh hotel and restaurant consortium.