Crown Resorts Ltd.’s (ASX: CWN) shareholder James Packer had 53% stake in CWN, and had stepped down as the chairman of the company four months ago. James Packer has also been said to reduce his stake in the company. Let us take a look at the following points which are being considered as reasons behind this move.
Divert investments to other development projects:James Packer did not give a reason for stepping down but said he planned to devote his energy to development projects in Sydney, Melbourne and Las Vegas. He has recently sold an A$448 million ($338 million) stake in Crown Resorts Ltd., reducing his ownership of the Australian casino operator to less than 50 percent. The sale has come two months after CWN announced plans to spin off its international investments, including a $2 billion stake in Macau casino operator Melco Crown Entertainment Ltd. CWN is also exploring an initial public offering of 49% of a property trust for some of its Australian hotels. As per James Packer’s privately held investment vehicle, Consolidated Press Holdings Pty (CPH) has agreed to sell about 35 million fully paid ordinary shares of about 4.8% of Crown at A$12.80 per share. Additionally, Consolidated Press is considering the sale to be part of its financial and capital management strategy, and the investment company supports Crown’s proposed spin-off and IPO. Through Consolidated Press, James would own about 48.2% of Crown after the sale. Moreover, the sale is considered to reduce debt and to restructure the capital position. On the other hand, CWN is grappling with the falling revenue in the Asian gambling hub of Macau as the gambling revenue has fallen for 18 straight months because of a Chinese government graft crackdown.
Debt payment and other settlement: The sale follows a review of Consolidated Press’s finances after James Packer’s A$1.25 billion settlement last year with his sister Gretel Packer. James Packer has taken over the running of CWN, then a media conglomerate called Publishing and Broadcasting Ltd, after his father's death in 2005, and transformed the company into one of the world's biggest casino developers and operators. In February, Ms Packer had emerged from negotiations with her brother with stakes in the listed Crown Resorts, American listed online real estate business Zillow, cash holdings and some interest in CPH. She also took a quarter share of what was her father’s beloved Ellerston property in the NSW Hunter Valley. However, under the original 2015 deal, Ms Packer, who has three children, had been entitled to a series of large cash payments from her brother, as well as retaining a residual interest in James Packer’s CPH, which holds his 53% Crown stake and a range of other investments. James Packer is understood to have taken on some debt last year to conclude the settlement with his sister. Thus, the move may have come at the back of need to pay debt post the settlement with the sister Gretel.
Investment in Australian Resorts (Source: Company Reports)
CWN stock rose 14% in the last three months (as of September 05, 2016), while the company is having a decent dividend yield.
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