Billionaire James Packer’s Crown Resorts is being split to isolate the struggling Macau business and break free the cash machine of the Australian casinos and associated property holdings.
A demerger will pull together the Melbourne and Perth casinos, the planned resort in Sydney and online gaming.
A separate company would then own some of the Crown Resorts’ international investments and provide exposure to the major gaming markets of Macau, Las Vegas and the UK, plus a 20% interest in Nobu restaurants.
A third entity, a property trust, would float 49% of the Australian Crown Resorts’ land.
Packer, who owns 53% of Crown Resorts, has made no secret that he thinks the company’s returns have been substandard.
The plan includes a new dividend policy to pay shareholders 100% of normalised net profit after tax, effective immediately.
Packer appears also to be taking himself further away from the operations side of the business.
He resigned as chairman of Crown in August last year. At that time, there was a suggestion that he become a senior executive and take a salary for the first time in his life.
However, the company now says Packer will not be engaged as a senior executive and no salary will be paid.
He may be called in when needed. Crown will ink a services agreement with Packer’s private company, Consolidated Press Holdings Group (CPH). Crown will be able to request services from key executives at agreed hourly rates. However, services provided by Packer will not be subject to any charge.
Crown has for been looking for a way to address what it calls a “material undervaluation” by the market due to the company’s traditional amalgamated structure.
In the latest half year results, Crown posted a flat 1.6% rise in half-year profits to $205.045 million on weak returns from Macau. Revenue was up 10.1% to $1.879 billion for the six months to December.
However, Crown’s share of profits from Melco Crown Entertainment, the casino operator in Macau, were down 89% to $9.4 million, a drop of $75.9 million.
“We believe that Crown Resorts’ extremely high quality Australian resorts are not being fully valued and the Crown Resorts share price has been highly correlated to the performance of its investment in Macau,” says Crown chairman Robert Rankin.
“The proposed demerger reflects the different nature of Crown Resorts’ controlled Australian operating assets from its international investments.”