The Crown Resorts Ltd (ASX: CWN) share price will be one to watch on Friday after the casino and resorts operator provided an update on the Melco transaction.
What is the transaction?
At the end of May, James Packer's Consolidated Press Holdings (CPH) announced the sale of a 19.99% stake in Crown Resorts for $1.76 billion or $13.00 per share to Lawrence Ho's Melco Resorts and Entertainment.
Mr Packer advised that this was in order to diversify CPH's investment portfolio.
At the time, Mr Packer said: "Crown has been a massive part of my life for the last 20 years and that absolutely remains the case today – my continuing Crown shareholding represents my single largest investment. I am still vitally interested in Crown's success as a world class resort and gaming business. The sale allows me to continue my long term involvement with Crown and at the same time to better diversify my investment portfolio."
The first tranche completed in June last year, with the second tranche remaining subject to written notice from several regulators that it is a suitable group to manage a casino.
However, Melco Resorts and Entertainment has just announced that it has now pulled the plug on the deal.
Coronavirus concerns
Melco Resorts has pulled out of the deal due to concerns over the impact of the coronavirus outbreak.
It advised: "Due to the impact of the coronavirus epidemic, including the severe drop in tourism in Asia to Integrated Resort (IR) facilities in the region, and the recent decision by the Macau SAR government to close all casinos in Macau, Melco has taken the decision to reassess all non-core investments to be made in 2020."
"As a result of this decision, Melco will not pursue its planned investment in Australia for the second tranche of shares in Crown Resorts Limited. 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."
The two parties have agreed to terminate the obligation to purchase the second tranche of Crown shares under the purchase agreement.
