Melco exits Crown in a $550 million deal with Blackstone

Melco exits Crown in a $550 million deal with Blackstone

US private equity investment firm The Blackstone Group has acquired 67 million shares in Crown Resorts (ASX: CWN) from Melco Resorts & Entertainment at $8.15 per share.

The bulk-purchase represents 9.99 per cent of the issued capital of Crown and is worth around $550 million.

Melco recently pulled out of a $1.76 billion investment of the Australian casino giant because of the global impact on the entertainment and tourism sector caused by COVID-19.

The Hong-Kong based casino and entertainment company, headed by James Packer's former business partner Lawrence Ho, would have held around 20 per cent of the entire company.

Only half of the transaction was completed, with the remaining tranche canned as Melco decided to reassess all non-core investments to be made in 2020.

The deal was already subject to a local investigation by the NSW Independent Liquor and Gambling Authority for possible contraventions of the Casino Control Act.

Lawrence Ho is the son of Macau's most influential casino magnate Stanley Ho, who held a government-granted monopoly on the Macau gambling industry for decades and allegedly had ties to the Kung Lok triad organised crime syndicate based in Canada.

Up until 28 June this year, Lawrence Ho was a director of Lanceford Company Limited.

Association with Stanley Ho is prohibited under certain anti-crime licensing conditions of the Barangaroo Crown property, which is currently under construction in Sydney.

Melco has come out with a $330 million loss on the deal, and its hasty exit has been to Blackstone's benefit today as shares are up by close to 11 per cent.

This means the US firm is now up $93.8 million on its investment already.

The purchase of 9.99 per cent of Crown Resorts it the latest in a string of casino and accommodation acquisitions for The Blackstone group in 2020.

The company has dropped just over $8 billion on Las Vegas casino and accommodation assets sine November 2018, including the famous Bellagio and Mandala Bay properties as part of a joint venture with MGM Resorts.

Today's acquisition mirrors Blackstone's $6 billion acquisition of Hilton Worldwide in October 2007 ahead of the market crash.

"At the worst point in the financial crisis, our $6 billion equity investment, it was marked down to $0.31 on the dollar, but the firm is staying power allowed us to focus on executing our operating plan," said Blackstone Group CEO and co-founder Steve Schwarzman.

"When the world eventually recovered, Hilton generated 10 times that marked down value with $14 billion of profit for our investors, which may be the largest in private equity history."

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