Casino tycoon James Packer has seen his potential exit from Crown Resorts Group go up in smoke after its single largest non-institutional shareholder, Lawrence Ho, sold his stake amid a high-stakes inquiry.
Mr Ho’s departure leaves Mr Packer in the firing line, with the possibility that regulators could force him to divest Crown’s casino interests.
Less than a year ago, Mr Ho’s Melco Resorts group signed a deal with Mr Packer to buy 20 per cent of Crown for $1.8 billion.
The first half of the deal went through, but it piqued the interest of regulators who demanded a look behind the corporate veil at Melco’s operations.
Mr Ho balked at that and took the regulator, NSW Independent Liquor and Gaming Authority, to court, only to have the judge tell him he had to comply with the request.
Mr Ho responded that he would not buy the second stake and on Wednesday sold the 9.9 per cent he did own to global investor Blackstone.
The move puts Mr Packer in a lonely position with 35 per cent of the company in his hands, his relationship with Mr Ho dissolved, and without a formal board position at both Crown and his private CPH group, after he quit citing mental health issues in 2018.
He has also lost the guidance of long-time Packer family lieutenant, John Alexander, who has stepped down as executive chairman and will be gone from management later this year.
This is why
There are two factors driving the Ho exit, according to Charles Livingstone, a Monash University professor who specialises in critical gambling studies.
“Macao [where most of Mr Ho’s gambling interests reside] has been hit hard by internal travel bans and 80 to 90 per cent of Macao’s economy depends on gambling,” Dr Livingstone said.
That means Mr Ho will be very focused on saving his Macao operations.
Secondly, there is the investigation.
“He wouldn’t want to have his business exposed to the investigation which could result in he, or even Crown, to be found not a fit and proper person to hold a gambling licence,” Dr Livingstone said.
“The NSW investigation wrong-footed the deal and it will be followed by similar measures in Victoria and Western Australia.”
Stanley Ho looms large
Among other things, regulators would be looking for connections between Melco and Mr Ho’s father, Stanley.
Mr Ho Sr is barred from gambling interests in Australia because authorities believe he has connections with Chinese organised crime.
Crown has been under pressure for the past few years due to its connections with Chinese organised crime, and breaches of Chinese law and Australian immigration rules.
For example, it emerged that Crown had extensive links with Huang Xiangmo, the businessman who was expelled on ASIO’s recommendation and whose connections ended the political career of up-and-coming Labor Senator Sam Dastyari.
The withdrawal of Mr Ho from Crown “could be an indication of business being brought into the increasingly acrimonious diplomatic relationship between Australia and China,” said Professor James Laurenceson, director of the Australia-China Relations Institute at UTS.
Economy following diplomacy?
If economic relations follow the decline of diplomatic relations, that would be bad news as economic relations have provided the ballast in the Australia-China relationship, Professor Laurenceson said.
Despite the negative publicity and the Ho departure, Crown’s power appears to remain intact, Dr Livingstone said.
“It’s a big player in the corporate world and has for a long time been able to exert political influence,” he said.
In Victoria, the Kennett Liberal government had pledged to provide $200 million if Crown hit hard times and Labor accepted that when it got to power.
“It’s a remarkable situation,” Dr Livingston said.
But it is still possible that the NSW regulatory inquiry into Crown’s planned new casino at Barangaroo in Sydney could come down against the company and bar it from owning the new casino, Dr Livingston said.
Mr Packer’s current position of being a major shareholder but not on the board was highly unusual.
“He has so much money that if he is unwell, he could just appoint someone to run things for him,” Dr Livingston said.
Stuart Jackson, a researcher with Montgomery Investment Management, said Mr Ho’s move “comes back to recent regulatory announcements”.
“They leave him basically stuck in Crown with a small shareholding so it was inevitable that he would sell out,” Mr Jackson said.
Mr Ho bought into Crown at $13 a share and sold at $8.15, suffering a significant reported loss of roughly $HK1.3 billion, or $260 million, in the process.
It had been widely speculated that Lawrence Ho was Mr Packer’s out from Crown following his withdrawal from the board and management.
That possibility has now gone.