Crown Resorts break-up plan gets positive response from Australian government and regulators
Crown Resorts announced in June 2015 that it planned to break up its casino empire by separating its international business from its domestic operations and began discussions with the Australian government and regulators over the proposed split. Crown Resort’s collection of casinos in Australia has continued to do well but its business in Macau has continued to suffer as the biggest gambling hub in the world has witnessed a drop in revenues for twenty five consecutive months.
Crown Resorts owns a 27 percent stake in Melco Crown Entertainment which operates a number of casinos in Macau including the recently opened Studio City. Crown Resorts operates casinos in Sydney, Melbourne and Perth and has plans to add a new hotel to its Perth facility and develop a $2 billion Barangaroo casino and hotel. The break-up could be finalized before the end of this year as both the government and regulators have been positive over the proposed split.
In a statement, Rowen Craigie, chief executive officer of Crown Resorts said “I would describe that work so far as reasonably positive. It is only quarter time in a six to nine-month process but so far the response from government and regulators has been positive.”
The break-up could result in the creation of a property trust that covers a total of 2,300 Crown hotel rooms in Australia. Crown will have a 49 percent stake in the trust which could end up valued at around $2 billion should it be placed on the ASX. Crown Resorts reported that it received a $602 million net gain due to the partial sale of its stake in its Melco Crown venture which helped boost its net profit after tax which stood at $943 million for the 2016 financial year. The company’s overall normalized net profit declined by 22 percent when compared to the previous year and stood at $406 million which was in line with analyst predictions for Crown’s on-going operations.
Crown’s share of normalized profits after tax in with Melco was $58.1 million, a decline by 64 percent when compared to last year. Crown which has a 27.4 percent in the venture has confirmed that it will not be selling anymore shares as it wants to continue having a presence in the Macau market. Craigie admitted that while Macau’s gambling industry continued to be subdued, he remained positive that Australian casinos could continue to do well and capture market share.
Craigie also confirmed that Crown Resorts would aggressively battle the charges filed by Millers Point Fund, an activist organization that wants to stop the construction of the Barangaroo casino and hotel. Rohan Sundram, an analyst at Citi predicts that Crown’s business in Australia will experience growth in 2017 and earnings will increase with the opening of the new hotel in Perth. Sundram also expects a profitability ramp up for corporate bookmaker CrownBet, where Crown has a 62 percent stake.