Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Bottom-Up

Melco International Development / Equity Bottom-Up

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<p>This week in StubWorld  ...</p>
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<p>With the clock ticking and less than one year until the Macau gaming concession renewal, a simple extension appears the logical course of action. Yet a Macanese government consultation paper believes the VIP room model is untenable under the SAR's national security law.</p>
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<p>Preceding my comments on Wynn are the updated setup/unwind tables for Asia-Pacific Holdcos.</p>
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<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.</p>
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<p>As always, more below the fold.</p>
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This week in StubWorld  ...




With the clock ticking and less than one year until the Macau gaming concession renewal, a simple extension appears the logical course of action. Yet a Macanese government consultation paper believes the VIP room model is untenable under the SAR's national security law.




Preceding my comments on Wynn are the updated setup/unwind tables for Asia-Pacific Holdcos.


These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.


As always, more below the fold.


StubWorld: Gambling On Macau's Gaming Concession Renewal

Event-Driven

Last Week In Event SPACE: Didi Chuxing, Sydney Airport, Weibo, Container Shipping, Macau Gaming

Melco International Development / Event-Driven

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<p>This week in StubWorld ...</p>
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<p><a href="https://www.smartkarma.com/entities/melco-international-development-ltd" target="_blank" data-smartkarma-citation="entities:809:1" rel="noopener">Melco International Development (200 HK)</a>'s has bounced off its all-time low NAV discount and implied stub back in March, and is now back to +2 STD levels. </p>
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<p>Preceding my comments on Melco are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
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<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.</p>
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<p>As always, more below the fold.</p>
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This week in StubWorld ...




Melco International Development (200 HK)'s has bounced off its all-time low NAV discount and implied stub back in March, and is now back to +2 STD levels. 




Preceding my comments on Melco are the weekly setup/unwind tables for Asia-Pacific Holdcos.


These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.


As always, more below the fold.


StubWorld: Lock In Profits As Melco's NAV Discount Narrows

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<p>When <a href="https://www.smartkarma.com/entities/crown-resorts-ltd" target="_blank" data-smartkarma-citation="entities:808:1" rel="noopener">Crown Resorts (CWN AU)</a> <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02355769-3A563928?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> on the 22 March it had received an unsolicited, non-binding and indicative takeover <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02355769-3A563928?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">proposal</a>, by way of a Scheme, from Blackstone, at $11.85/share - a 19% premium to the average price of Crown's shares since the release of its <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02342917-3A561577?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">1H21 results</a>, my initial takeaway was "<em>Blackstone needs to bid higher</em>".</p>
<p>This morning, Blackstone did just that - increasing its non-binding proposal by 4% to <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02372885-3A566842?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">$12.35</a>.</p>
<p>Seven minutes later, Crown's domestic rival <a href="https://www.smartkarma.com/entities/star-entertainment-grp-ltd" target="_blank" data-smartkarma-citation="entities:926:1" rel="noopener">Star Entertainment Grp (SGR AU)</a> tabled an unsolicited, non-binding, and indicative <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02372888_PS-3A566843?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">proposal</a>, by way of a Scheme, either via the issuance of 2.68 new Star shares for every Crown share, or a possible cash alternative of A$12.50/share, subject to a scale back.</p>
<p>Both Offers still look light.</p>
<p>More below the fold. </p>
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When Crown Resorts (CWN AU) announced on the 22 March it had received an unsolicited, non-binding and indicative takeover proposal, by way of a Scheme, from Blackstone, at $11.85/share - a 19% premium to the average price of Crown's shares since the release of its 1H21 results, my initial takeaway was "Blackstone needs to bid higher".
This morning, Blackstone did just that - increasing its non-binding proposal by 4% to $12.35.
Seven minutes later, Crown's domestic rival Star Entertainment Grp (SGR AU) tabled an unsolicited, non-binding, and indicative proposal, by way of a Scheme, either via the issuance of 2.68 new Star shares for every Crown share, or a possible cash alternative of A$12.50/share, subject to a scale back.
Both Offers still look light.
More below the fold. 


Crown Resorts: Blackstone & Star Place Their Bets

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<p>Back on the 29 April 2020, <a href="https://www.smartkarma.com/entities/melco-international-development-ltd" target="_blank" data-smartkarma-citation="entities:809:1" rel="noopener">Melco International Development (200 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0429/2020042900625.pdf" target="_blank" rel="noopener">announced</a> <a href="https://www.smartkarma.com/entities/melco-crown-entertainme-adr" target="_blank" data-smartkarma-citation="entities:810:1" rel="noopener">Melco Resorts &amp; Entertainment (MLCO US)</a> had sold its 9.99% stake in <a href="https://www.smartkarma.com/entities/crown-resorts-ltd" target="_blank" data-smartkarma-citation="entities:808:1" rel="noopener">Crown Resorts (CWN AU)</a> to Blackstone.</p>
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<p>A brief recap of recent events leading to this sale:</p>
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<h2>Data in the Date</h2>
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<td style="width: 105.734px;">9-Apr-19</td>
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<p><a href="https://www.asx.com.au/asxpdf/20190409/pdf/4445cxw9qtdqsv.pdf" target="_blank" rel="noopener">Crown Resorts (CWN AU) announced</a> it is in confidential discussions with <a href="https://www.smartkarma.com/entities/606" target="_blank" data-smartkarma-citation="entities:606:1" rel="noopener">Wynn Resorts (WYNN US)</a> concerning an acquisition of Crown by way of a Scheme. The announcement states that Wynn has approached Crown on more than one occasion.</p>
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<p>WYNN confirmed it and released an <a href="https://wynnresortslimited.gcs-web.com/static-files/78ae4df4-3d63-4f65-b21a-58a4f4d11469" target="_blank" rel="noopener">8K</a> in the early hours of the 9th saying they would not comment further.</p>
<p>Several hours later, WYNN apparently said it was terminating deal talks with Crown because of the "premature disclosure of preliminary discussions".</p>
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<td style="width: 105.734px;">30-May-19</td>
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<p>Melco <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0530/ltn201905301127.pdf" target="_blank" rel="noopener">announced</a> an intention to acquire 19.99% in Crown from James Packer,  in a transaction spread across two tranches. The first tranche was completed on the 6 June.</p>
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<td style="width: 105.734px;">8-Aug-19</td>
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<p>Crown <a href="https://www.asx.com.au/asxpdf/20190808/pdf/447bdl046231kq.pdf" target="_blank" rel="noopener">announced</a> the NSW Independent Liquor and Gaming Authority would be conducting an inquiry, under section 143 of the <a href="https://www.legislation.nsw.gov.au/#/view/act/1992/15/part10/sec143" target="_blank" rel="noopener">Casino Control Act 1992 (NSW)</a>. On the 28 August, Crown and MLCO <a href="https://www.asx.com.au/asxpdf/20190829/pdf/447zqp91kz1r5l.pdf" target="_blank" rel="noopener">amended</a> the share sale agreement, which effectively put on hold the sale of the second tranche until the inquiry was completed satisfactorily.<br><br></p>
<p>The inquiry was predicated on reports of money laundering at Crown casinos and organised crime involved in running junkets. Crown had previously <a href="https://www.asx.com.au/asxpdf/20190730/pdf/4470lbwt6dd5s4.pdf" target="_blank" rel="noopener">announced</a> it would fully co-operate with any investigation, and that it had a comprehensive anti-money laundering and counter-terrorism financing program.</p>
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<td style="width: 105.734px;">6-Feb-20</td>
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<p>Melco/MLCO <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0206/2020020601305.pdf" target="_blank" rel="noopener">announced</a> it had terminated its obligation to purchase an additional 9.99% of Crown. MLCO said: "that due to the impact of the coronavirus epidemic, including the severe drop in tourism in Asia to integrated resort facilities in the region, and the recent decision by the government of the Macau Special Administrative Region of the People's Republic of China to close all casinos in Macau, Melco Resorts has taken the decision to reassess all non-core investments to be made in 2020."</p>
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<td style="width: 105.734px;">29-Apr-20</td>
<td style="width: 597.798px;">Blackstone <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0429/2020042900625.pdf" target="_blank" rel="noopener">acquires</a> MCLO's 9.99% stake in Crown</td>
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<p>Blackstone paid $551.55mn for the 67.675mn shares in Crown, or A$8.15/share, a 2.37% discount to the average closing price of A$8.348 over the preceding five days. MLCO paid A$13/share back in June the previous year.  9.99% confers a passive stake, with no board seat.  Media reports were that Blackstone's acquisition was opportunistic in nature, and that they had no plans to increase their stake.</p>
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<p>"<em>For now, maybe</em>" was my assessment at the time, and that once the casino inquiry completed, and taking the view Crown remained on as the licensee, Blackstone would make its move. </p>
<p>Fast forward to the 9 February this year when the NSW Independent Liquor and Gaming Authority (ILGA) found that Crown – through its subsidiary Crown Sydney Gaming – was not suitable to hold the licence for the second Sydney casino at Barangaroo.</p>
<p>Some of the more damning conclusions in the extensive 18-month inquiry (encompassing 768 pages over two volumes - <a href="https://www.parliament.nsw.gov.au/tp/files/79129/Volume%201%20-%20Inquiry%20under%20section%20143%20of%20the%20Casino%20Control%20Act%201992.pdf" target="_blank" rel="noopener">here</a> &amp; <a href="https://www.parliament.nsw.gov.au/tp/files/79129/Volume%202%20-%20Inquiry%20under%20section%20143%20of%20the%20Casino%20Control%20Act%201992.pdf" target="_blank" rel="noopener">here</a>) concerned the facilitation of money laundering and the enabling of criminals to infiltrate the Melbourne and Perth casinos. </p>
<p>Subsequent to the ILGA report, five directors and CEO <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02341002-3A561139?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">Ken Barton</a> resigned.</p>
<h3>The New News</h3>
<div>Crown <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02355769-3A563928?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> today it has received an unsolicited, non-binding and indicative takeover <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02355769-3A563928?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">proposal</a>, by way of a Scheme, from Blackstone, at $11.85/share - a 19% premium to the average price of Crown's shares since the release of its <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02342917-3A561577?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">1H21 results</a>.</div>
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<div>The Offer is subject to a raft of conditions including "<em>regulatory confirmation that a Blackstone-owned Crown is </em><em>considered suitable to own and operate the Sydney, Melbourne, and Perth casino licences</em>".</div>
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<p>More below the fold. </p>
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Back on the 29 April 2020, Melco International Development (200 HK) announced Melco Resorts &amp; Entertainment (MLCO US) had sold its 9.99% stake in Crown Resorts (CWN AU) to Blackstone.


A brief recap of recent events leading to this sale:







Date


Data in the Date



9-Apr-19

Crown Resorts (CWN AU) announced it is in confidential discussions with Wynn Resorts (WYNN US) concerning an acquisition of Crown by way of a Scheme. The announcement states that Wynn has approached Crown on more than one occasion.

WYNN confirmed it and released an 8K in the early hours of the 9th saying they would not comment further.
Several hours later, WYNN apparently said it was terminating deal talks with Crown because of the "premature disclosure of preliminary discussions".



30-May-19

Melco announced an intention to acquire 19.99% in Crown from James Packer,  in a transaction spread across two tranches. The first tranche was completed on the 6 June.



8-Aug-19

Crown announced the NSW Independent Liquor and Gaming Authority would be conducting an inquiry, under section 143 of the Casino Control Act 1992 (NSW). On the 28 August, Crown and MLCO amended the share sale agreement, which effectively put on hold the sale of the second tranche until the inquiry was completed satisfactorily.  
The inquiry was predicated on reports of money laundering at Crown casinos and organised crime involved in running junkets. Crown had previously announced it would fully co-operate with any investigation, and that it had a comprehensive anti-money laundering and counter-terrorism financing program.



6-Feb-20

Melco/MLCO announced it had terminated its obligation to purchase an additional 9.99% of Crown. MLCO said: "that due to the impact of the coronavirus epidemic, including the severe drop in tourism in Asia to integrated resort facilities in the region, and the recent decision by the government of the Macau Special Administrative Region of the People's Republic of China to close all casinos in Macau, Melco Resorts has taken the decision to reassess all non-core investments to be made in 2020."



29-Apr-20
Blackstone acquires MCLO's 9.99% stake in Crown






Blackstone paid $551.55mn for the 67.675mn shares in Crown, or A$8.15/share, a 2.37% discount to the average closing price of A$8.348 over the preceding five days. MLCO paid A$13/share back in June the previous year.  9.99% confers a passive stake, with no board seat.  Media reports were that Blackstone's acquisition was opportunistic in nature, and that they had no plans to increase their stake.


"For now, maybe" was my assessment at the time, and that once the casino inquiry completed, and taking the view Crown remained on as the licensee, Blackstone would make its move. 
Fast forward to the 9 February this year when the NSW Independent Liquor and Gaming Authority (ILGA) found that Crown – through its subsidiary Crown Sydney Gaming – was not suitable to hold the licence for the second Sydney casino at Barangaroo.
Some of the more damning conclusions in the extensive 18-month inquiry (encompassing 768 pages over two volumes - here &amp; here) concerned the facilitation of money laundering and the enabling of criminals to infiltrate the Melbourne and Perth casinos. 
Subsequent to the ILGA report, five directors and CEO Ken Barton resigned.
The New News
Crown announced today it has received an unsolicited, non-binding and indicative takeover proposal, by way of a Scheme, from Blackstone, at $11.85/share - a 19% premium to the average price of Crown's shares since the release of its 1H21 results.


The Offer is subject to a raft of conditions including "regulatory confirmation that a Blackstone-owned Crown is considered suitable to own and operate the Sydney, Melbourne, and Perth casino licences".


More below the fold. 


Crown Resorts (CWN AU): Blackstone Rolls the Dice

Hong Kong

Melco International Development Limited, through its subsidiaries, operates investment banking, financial services, technology, fine-dining, leisure and tourism, property investment, and investment businesses. The Company carries on financial service businesses under the VC CFN and VC CEF brand names.  Melco also customizes and sells trading and back office systems under the iAsia name.

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Melco International Development (200 HK)

StubWorld: Gambling On Macau's Gaming Concession Renewal

The clock is ticking with less than one year until the Macau gaming concession renewal, a simple extension appears the logical course of action.

David Blennerhassett

Last Week In Event SPACE: Didi Chuxing, Sydney Airport, Weibo, Container Shipping, Macau Gaming

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

StubWorld: Lock In Profits As Melco's NAV Discount Narrows

If you had set-up Melco - Long Melco and Short MLCO - I'd unwind that trade. I'd be inclined to reverse the stub here - Short Melco and Long MLCO.

David Blennerhassett

Crown Resorts: Blackstone & Star Place Their Bets

Assuming Crown retains the casino licenses in Sydney, Melbourne, and Perth, removing the investigative overhang, then Crown will re-rate beyond...

David Blennerhassett

Crown Resorts (CWN AU): Blackstone Rolls the Dice

Some investors feel $11.85/share is reasonable given Crown's plight. Yet this company is worth significantly more if there is a reset and...

David Blennerhassett

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