Melco likely to target full Crown acquisition: Bernstein

Crown Melbourne

Melco’s moves to acquire a 19.99 percent interest in Crown Resorts is likely stepping stone for eventually taking controlling ownership, or outright acquisition of Crown, according to analysts from Bernstein. 

Earlier this year, Melco announced it is acquiring a 19.99 percent stake in the Australian casino operator for a total consideration of US$1.2 billion. 

The transaction hit a snag earlier this month, after “sensationalistic” news articles called into question whether Melco is linked to unscrupulous parties, prompting both the NSW and Victorian gaming regulators to launch a probe into the allegations. 

A key focus of the probity review will be on the linkage between Lawrence Ho and his father, Stanley Ho. 

“There is risk that in such an environment a Melco acquisition (or even the board seat it seeks with the 19.99 percent interest) could be denied by the regulators – but this would be unfortunate for both Melco and Australia’s gaming industry,” said Bernstein.

That being said, the analysts believe both Melco and Lawrence Ho to clear the probity review and receive regulatory approval on the merits. 

“After all, Melco and CWN had been long-time partners before CWN sold its stake in MLCO. Stanley Ho has been pretty much out of the whole gaming picture since 2009 after suffering from a fall at home and being confined to a hospital for 7 months thereafter.”

“However, politics being what it is, there is no assurance that such regulatory approval will be given (in light of both the prevailing China-Australia tensions that exist and the fog surrounding Crown’s links to junkets).”