Lawrence Ho, CEO of Melco resorts has backtracked on plans to purchase Crown casino shares; this decision was taken against the recent backdrop of the casino being subjected to a public investigation and scandal, over alleged illegal activities.
Ho, a prominent Hong Kong businessman was set to purchase James Packer’s shares of the crown casino, planning to expand his portfolio beyond the borders of his home country. The ongoing investigation seems to have soured his interest and Melco have put their plans on hold, pending the outcome of the investigation.
Melco have indicated that a total cancellation of the trade is also possible, should the investigation result in an unfavourable decision for Melco and Crown casino.
These revelations came to light on Wednesday and are just a small part of the fallout as a result of the investigation, led by a number of media companies within Australia. The investigation uncovered that Crown casino was involved with junket companies that are backed by Asian crime gangs and Chinese foreign influence agents. This triggered a secondary investigation by the NSW Independent Liquor and Gaming Authority.
While the investigation is ongoing, the gambling industry has been carrying on with business as normal. Demand for Australian casino games continues to grow, with the outlook for the industry at large, remaining healthy and positive. The investigation is, however, likely to have far-reaching effects, outside of Australia.
The sale of the shares came under particular scrutiny, due to the father of Melco’s owner, Stanley Ho, having alleged ties to Asian gangs, leading investigators to believe that the sale might be related to the illegal junket operations. Melco had agreed to the purchase of a stake that is worth around $1.7 billion, with the first 10 percent transfer happening before September 30th.
The current effects of the fallout
Melco Resorts has released a statement on the NASDAQ exchange. Here, they agreed with Consolidated Press Holdings’ suggestion to extend the possibility of the deal going through by another 60 days. CHP stated that they did not perceive any breach of an agreement or unlawful activities that Melco had been taking all the steps agreed on between the two entities. The does, however, contain clauses that could result in total cancellation of the deal.
Melco kept mum about the 10 percent that they had already purchased from Crown, in the face of an increasingly complicated matter.
Crown was granted a license to create their $2 billion casinos by 2021 in Sydney provided that they agree to list of individuals and casinos that they would be prohibited from working with. Stanley Ho and Melco were on this original list, which was made public recently. Included is a casino owned by Stanley Ho, that Crown casino has dealt with extensively.
The Great Respect Limited, another company linked to Mr. Ho, is a 20 percent owner of Melco International and has a controlling stake in Melco Resorts, which, the entity with a purchasing stake in Crown. The intertwined, shadowy nature of the situation between Crown and Melco, spells serious trouble for these companies.
The current inquiry seeks to expose exactly to what extent the company has managed to breach the terms of the agreement, beyond simply breaking the law. The investigation is open-ended, with no expected date of completion being set as yet
Melco and Crown had a previous partnership, which was canceled after 19 individuals of the Crown staff were arrested on gambling-related charges.
James packer will have to wait and see if he can offload his shares, as the current situation has the future of Crown and Melco in a state of suspense.