If Crown Resort’s complete retreat from Macau seems a like an ignominious defeat, the Australian Financial Review reminded us this week that James Packer actually killed it over there.
Early last week it was announced that Crown Resorts was divesting itself of its remaining stake of about 11.2 percent in Melco Crown, the last remaining vestige of Packer’s Macau dream.
Crown started selling chunks of Melco Crown back to the company in May last year, just as the former Portuguese colony appeared to bottom out and embark on a recovery.
That could be put down to a unfortunate fluke of timing, but the arrest in October of 14 Crown Resorts employees in China on suspicion of marketing Crown’s services to Chinese mainlanders altered the company’s entire perspective on its international VIP operations and exposed Crown to accusations of a failure in risk management.
Moreover, it embarrassed the Crown board into selling hundreds of millions of dollars more in stock as it sought to reduce its investment exposure to China and concentrate on domestic projects instead.
That was perceived as a colossal misstep for Crown, and it may yet prove to be so, but, as far as the figures go, Packer’s investment in Macau, and the subsequent sale of stock, was one of the best business decisions he ever made.
Towards the end of 2014, Packer invested $211 million into the joint venture with Lawrence Ho that would come to be known as Melco Crown, an investment that ultimately grew into $770 million.
But including dividend payments and the sale of stock over the past 12 months, he has made cash returns of around $4.5 billion.
The China arrests caused Crown’s VIP revenue to nosedive, as the company retreated from its international expansion to concentrate on domestic projects, such as Sydney’s Barangaroo casino, and to pay down debt and bolster its balance sheet.
With the dip in VIP revenues came a reshuffling of the board, in which Packer and his right-hand man, John Alexander, took more control, as well as an economy drive that resulted in the selling-of company assets that were little more than VIP marketing tools, like the fleet of private jets, and several yachts.
The Grand Scheme of Things
Packer has also sold off many of his other, extra-curricular investments, such as his stake in the successful Hollywood production company Rat-Pac Entertainment, as well as Pretty Girl Fashion Group and Noni B, largely at a profit.
All this leaves him with not much else to focus on other than Crown Resorts and the Australian market, which is what it appears he intends to do, although a move into Japan, when it finally opens up, may be in the offing, regulators permitting.
If Packer’s withdrawal from Macau is seen as a failure, it’s a failure that made him billions. And he’s done with Macau. The question is, where next?