HONG KONG: The coronavirus epidemic has claimed its first big M&A deal, with Macau casino operator Melco Resorts & Entertainment pulling the plug on a stake purchase in Australia's Crown Resorts, citing a plunge in traveller numbers and casino closures.
Macau, the world's biggest gambling hub, has ordered casino operators to suspend operations for two weeks in a bid to limit the spread of the virus – a decision analysts say is likely to lead to months of cashflow bleed across the industry.
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A slew of flight cancellations due to the virus has hit tourism in the region while the closure of stores and factories is also pounding business activity in China, a key source of international gamblers.
The developments were seen as the last straw for Melco's planned purchase of a second 9.99 per cent stake in Crown from billionaire James Packer.
The total planned acquisition of a 19.99 per cent holding was valued at A$1.76 billion (US$1.2 billion) when it was announced last May.
READ: Wuhan coronavirus silences Macau's bustling casinos
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Even before the virus, the deal had raised regulatory concerns over links with Stanley Ho, father of Melco owner Lawrence Ho.
Stanley Ho was previously under investigation by authorities in Australia and the United States for possible ties to organised crime.
Then in August, Packer froze the sale of the second tranche pending an investigation into alleged criminal activity at Crown's Australian operations.
"Any further acquisition of Crown would have likely been a bigger bite than Melco could reasonably handle. The reining in of what was beginning to look like an empire build should be looked on favorably by Melco shareholders," said Vitaly Umansky, analyst at Sanford C Bernstein in Hong Kong.
READ: Macau to suspend casino operations for 2 weeks to curb spread of novel coronavirus
Melco also shelved plans for a seat on Crown's board and analysts said it is likely to divest its current 9.99 per cent holding in the future.
Blaming the epidemic, which has killed more than 630, for its decision, Melco said in a statement it wants to focus on its core investments.
Read More – Source
HONG KONG: The coronavirus epidemic has claimed its first big M&A deal, with Macau casino operator Melco Resorts & Entertainment pulling the plug on a stake purchase in Australia's Crown Resorts, citing a plunge in traveller numbers and casino closures.
Macau, the world's biggest gambling hub, has ordered casino operators to suspend operations for two weeks in a bid to limit the spread of the virus – a decision analysts say is likely to lead to months of cashflow bleed across the industry.
Advertisement
Advertisement
A slew of flight cancellations due to the virus has hit tourism in the region while the closure of stores and factories is also pounding business activity in China, a key source of international gamblers.
The developments were seen as the last straw for Melco's planned purchase of a second 9.99 per cent stake in Crown from billionaire James Packer.
The total planned acquisition of a 19.99 per cent holding was valued at A$1.76 billion (US$1.2 billion) when it was announced last May.
READ: Wuhan coronavirus silences Macau's bustling casinos
Advertisement
Advertisement
Even before the virus, the deal had raised regulatory concerns over links with Stanley Ho, father of Melco owner Lawrence Ho.
Stanley Ho was previously under investigation by authorities in Australia and the United States for possible ties to organised crime.
Then in August, Packer froze the sale of the second tranche pending an investigation into alleged criminal activity at Crown's Australian operations.
"Any further acquisition of Crown would have likely been a bigger bite than Melco could reasonably handle. The reining in of what was beginning to look like an empire build should be looked on favorably by Melco shareholders," said Vitaly Umansky, analyst at Sanford C Bernstein in Hong Kong.
READ: Macau to suspend casino operations for 2 weeks to curb spread of novel coronavirus
Melco also shelved plans for a seat on Crown's board and analysts said it is likely to divest its current 9.99 per cent holding in the future.
Blaming the epidemic, which has killed more than 630, for its decision, Melco said in a statement it wants to focus on its core investments.
Read More – Source
