The James Packer-controlled Crown could get an offer for its US$600 million (A$675 million) stake in its Macau joint venture.
David Bain, a gambling analyst with the southern California arm of broking firm Sterne Agee, said in a note to clients that the world’s biggest casino operator, Harrah’s Entertainment, was “acutely interested” in buying the 32 per cent stake in Melco Crown Entertainment.
Melco Crown owns two casino’s in Macau: the US$3 billion City of Dreams and US$1 billion Altira Macau.
Citing “contacts in Macau”, Mr Bain said solicitors working for Macau’s chief executive, Fernando Chui Sai On, had been asked to examine “a potential transfer of ownership” of shares in Melco Crown Entertainment from Crown to Harrah’s.
Mr Packer has a long-standing relationship with senior executives at Harrah’s, and Crown has a 2.5 per cent interest in Harrah’s. The value of the stake in Harrah’s has been reduced to zero as part of $1.7 billion in write-downs by Crown over the past two years.
Harrah’s is owned by US private equity firms TPG, Apollo Management and Blackstone Group. It is best known for its Caesar’s Palace casino, one of eight, in Las Vegas.
Harrah’s is one of the few major US casino companies without a presence in Macau and its chief executive, Gary Loveman, has indicated he would like to open there. To do this, Harrah’s must either get a gambling concession from the Macau Government, partner an existing company or buy into a company.
The Government has already issued six concessions in Macau where there are 36 casinos. Harrah’s US rivals all have at least one casino in Macau either because they are one of six concession holders, or they bought ‘sub concessions’ from the six.
New operators are effectively shut out of the market under the concession system because the chances of the Macau Government issuing more gambling concessions are slim.
Last week, the director of Macau’s Gaming Inspection and Coordination Bureau, Manuel Joaquim das Neves, emphasised this when he said: “I think the possibility of more concessions is very low.”
This leaves a partnership or a purchase of one of the concession holders as the most likely option. Crown’s 32 per cent stake in Melco Crown was worth US$595 million, based on Friday’s closing price.
Shares in Melco Crown rose 6 per cent on Thursday (US time) to US$3.58, after the Sterne Agee analyst report was published. The broker put a US$8.50 target price on the stock.
Melco Crown is due to report its fourth quarter results late on Monday night (Melbourne time).
Crown spokesman Anthony Klok said yesterday that Crown would never comment on rumours.
Sydney Morning Herald
