Melco Resorts & Entertainment Delay Crown Stake Acquisition Due To NSW Investigation

The agreement to acquire a 19.99% stake in Australia’s Crown Resorts has been amended by the purchaser, Melco Resorts & Entertainment. This was done in order to allow the New South Wales Liquor and Gaming Authority to complete an investigation into the transaction and other matters related to the seller.

Melco closed the purchase of the first tranche of 67.675m shares in June, after inking the deal to acquire 135.35m shares in Crown Resorts in May. By 30 September, the second tranche of 67.675m shares was to be acquired by.

However…

… the Liquor and Gaming Authority announced that it will investigate the deal thoroughly.

Due to other allegations made against Crown earlier this month, the pair have agreed to defer closing on the sale for up to 60 business days following completion of the investigation.

Patricia Bergin, a former judge of the Supreme Court of New South Wales, has been appointed to lead the investigation. It relates to a license issued to operator in 2014 for a restricted gaming facility, to be located in Bangaroo, an inner-city suburb of Sydney.

First Things First

The investigation will first examine…

… Melco Resorts and its shareholders (Lawrence Ho, Geoff Davis, Stephanie Cheung, Akiko Takahashi, Evan Winkler, and Clarence Chung), suitable to own a property licensed under the Australian Casino Control Act.

Bergin’s must determine whether they:

• Have a good reputation
• Are conducting any business association with any person, body or association with a bad reputation

Following Features of the Investigation

The second part of the scrutiny relates to allegations published in the Australian media regarding Crown Resorts and its business associates.

Quite serious allegations…

… claim there is a strong possibility that Crown or its associates may have engaged in criminal activity and breached gambling laws.

The judge must determine whether:

• Crown is suitable to hold the Bangaroo license
• If it isn’t, what would have to be done in order to fulfill the license requirements

Another item on Bergin’s task list is to rule on whether the Crown’s sale of the stake to Melco represents a breach of the license agreement or any other regulatory agreement.

Furthermore…

… she will decide whether the Casino Control Act is fit for purpose, against a backdrop of an increasingly complex patchwork of risks faced by gaming and casino operators.

When the investigation will end is unknown, since no deadline has been set. Liquor and Gaming NSW stated it should be completed “as soon as reasonably practicable.”

If the inquiry leads to the closing of the second tranche sale occurring after 30 September, the price will be reduced by an amount equal to any dividends received on these shares between 6 June and the closing date.

However…

… it will also be increased by AUD$0.05 per second tranche share per calendar month after 30 September.

According to the agreement between Melco and Crown, the sale must be completed by 31 May 2020.

From this date, Melco could cancel the acquisition, though this deadline can be extended by up to six months.

Source:

“NSW investigation sees Melco delay Crown stake acquisition”, igamingbusiness.com, August 30, 2019.