Melco Resorts & Entertainment said it’s dropping its plans to buy a second tranche of shares in Australia’s Crown Resorts, citing the economic impact of the Coronavirus on the region.
The company said at this time it plans to focus on its core business and that its capital will be deployed on investment in “core” assets, such as Macau, the Philippines, Cyprus and its pursuit of a license in Japan.
Melco currently holds 67.67 million shares in Crown and under an accord agreed last year, had planned to buy a second tranche of the same amount. It said it has no plans to further increase its stake in Crown and would not be seeking representation on the company’s board.
“While Melco believes Crown has world-class assets that are complementary to its global business, it is Melco’s belief that, at this time, its capital needs to be deployed on its core assets,” it said.
Melco intends to carry out key investments currently earmarked for Macau, Manila, Cyprus, and Japan, including the construction of Studio City phase 2 and City of Dreams Mediterranean. “Management attention will remain focused on these critical areas of Melco’s business until such time as operations and business throughout Asia have returned to normal,” it said.
Melco agreed in March last year to buy 135.35 million shares in Crown from its majority shareholder James Packer. The stake amounts to 19.99 percent of the Australian operator for a purchase price of US$1.2 billion.
The acquisition of the first tranche was completed on June 30, but the second tranche was delayed for a period of up to 60 business days from September 30 to allow for the completion of a regulatory review.
Macau has shut down all 41 of its casinos from Wednesday for two weeks in a bid to contain the spread of the virus, while the Philippines has banned flights from China, Hong Kong and Macau.
Gross gambling revenue in Macau dropped 11.3 percent in January as the virus began to takes its toll, with an 87 percent drop in visitor arrivals to the territory over the Chinese New Year period, which fell late in the month.