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Crown to Sell $1.18 Billion Stake in Macau Casino Operator

Company reduces exposure to Chinese market

Crown is lowering its stake in Melco Crown Entertainment stake to 14% from 27.4%. Shown, Melco Crown Entertainment's City of Dreams casino resort in Macau.

SYDNEY— Crown Resorts Ltd. said it would reduce its exposure to the Chinese market by selling part of its stake in a Macau casino operator, a move that comes as China is pursuing criminal charges against some employees for gambling offenses.

Crown said it would sell shares in Melco Crown Entertainment Ltd., raising 1.6 billion Australian dollars (US$1.18 billion) and lowering Crown’s stake in that company to 14% from 27.4%. Crown said it plans to use the proceeds to reduce debt, fund a special dividend and pay for a share buyback, and that it is “exploring potential options” for part of its remaining holding.

In October, China detained 18 Crown staff, including three Australians, sending Crown’s shares plummeting and raising concerns among investors that Chinese high rollers would avoid Crown’s Australian casinos. Crown said Thursday that revenue in the first 23 weeks of the fiscal year is down 12% across its Australian resorts due to a reduction in VIP play, suggesting the arrests could be hitting profits.

The arrests in China, where gambling is illegal on the mainland and firms aren't allowed to directly advertise their casinos, sent a chill through the global gaming industry and was seen as a broad warning to foreign companies not to run afoul of Chinese regulations. Among those arrested was Jason O’Connor, vice president of international VIP operations, demonstrating that Chinese authorities wouldn’t hesitate to detain Western executives.

Casinos are becoming increasingly reliant on Chinese high rollers, and Chinese tourism to Australia has risen in recent years. Crown is building a new hotel and casino complex on Sydney’s waterfront predicated on attracting high rollers from China and elsewhere, so a significant drop-off in VIP play could raise worries about the project’s viability.

Crown said VIP play in the first 23 weeks is down 45%, though main-floor revenue at its Australian resorts was flat and nongaming revenue was up 4%. Crown, part-owned by Australian billionaire James Packer, operates casinos and hotels in Melbourne and Perth.

Crown also said Thursday that it wouldn’t move forward with a plan to spin off some of its international assets into a separately listed company and that it wouldn’t proceed with a project in Las Vegas. The company said it is continuing to work on an initial public offering of shares in a real-estate investment trust that would contain some of its Australian hotels and retail property, though that plan is subject to final approval from the board and market conditions.

“These business decisions are strategic and for the long term, and will underpin the company’s future over the next decade,” Chairman Robert Rankin said.

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