Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<div>
<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>
</div>


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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<div>
<p>A brief recap of recent events leading to this sale:</p>
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<h2>Date</h2>
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<td style="width: 597.798px;">
<h2>Data in the Date</h2>
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</tr>
<tr>
<td style="width: 105.734px;">9-Apr-19</td>
<td style="width: 597.798px;">
<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>
<p></p>
<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>
</td>
</tr>
<tr>
<td style="width: 105.734px;">30-May-19</td>
<td style="width: 597.798px;">
<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>
</td>
</tr>
<tr>
<td style="width: 105.734px;">8-Aug-19</td>
<td style="width: 597.798px;">
<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>
</td>
</tr>
<tr>
<td style="width: 105.734px;">6-Feb-20</td>
<td style="width: 597.798px;">
<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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</tr>
<tr>
<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>
</tr>
</tbody>
</table>
</div>
</div>
<div>
<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>
</div>
<div>
<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>
</div>
<div></div>
<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>
<div></div>
<div>
<p>More below the fold. </p>
</div>


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

Last Week in Event SPACE: China Youzan, Mcdonald's, Beijing Jingneng, Ricoh, Melco Resorts, LG Corp

Equity Bottom-Up

Melco International Development / Equity Bottom-Up

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<p>This week in StubWorld ...</p>
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<div class="content-highlight">
<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 underperformance against 56.8% held <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> sees an all-time low NAV discount and implied stub; and the simple ratio (Melco/MLCO) is around its lowest level since Melco took majority control in the Macau gaming play.</p>
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<p>Preceding my comments on Melco and xx are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
</div>
<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>
<div>
<p>As always, more below the fold.</p>
</div>


This week in StubWorld ...




Melco International Development (200 HK)'s underperformance against 56.8% held Melco Resorts &amp; Entertainment (MLCO US) sees an all-time low NAV discount and implied stub; and the simple ratio (Melco/MLCO) is around its lowest level since Melco took majority control in the Macau gaming play.




Preceding my comments on Melco and xx 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: Melco's All-Time Low As Macau Stocks Lag Las Vegas Plays

Melco International Development / Event-Driven

<div>
<p>This week in StubWorld ...</p>
</div>
<div>
<div class="content-highlight">
<p>Encouraging data about a potential coronavirus vaccine from <a href="https://www.smartkarma.com/entities/pfizer-inc" target="_blank" data-smartkarma-citation="entities:1131:1" rel="noopener">Pfizer Inc (PFE US)</a> gives a boost to Nevada-gaming stocks, which now trade "rich" to their Macau gaming holdings.</p>
<p>Conversely, <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> is trading cheap to <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>, as Lawrence Ho continues to add to his holding - plus there are large movements in CCASS.</p>
</div>
</div>
<div>
<p>Preceding my comments on Melco and <a href="https://www.smartkarma.com/entities/swire-pacific-ltd-cl-a" target="_blank" data-smartkarma-citation="entities:10433:1" rel="noopener">Swire Pacific (A) (19 HK)</a>  are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
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<div class="content-remarks">
<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>
</div>
</div>
</div>


This week in StubWorld ...



Encouraging data about a potential coronavirus vaccine from Pfizer Inc (PFE US) gives a boost to Nevada-gaming stocks, which now trade "rich" to their Macau gaming holdings.
Conversely, Melco International Development (200 HK) is trading cheap to Melco Resorts &amp; Entertainment (MLCO US), as Lawrence Ho continues to add to his holding - plus there are large movements in CCASS.



Preceding my comments on Melco and Swire Pacific (A) (19 HK)  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%.




StubWorld: A Shot In The Arm For Gaming Stocks

Hong Kong

China Travel International Investment Hong Kong Limited, through its subsidiaries, operates tourist attractions, golf clubs, hotels, and other travel related activities.  The Company also provides passenger transportation as well as freight forwarding and cargo services.

China Travel International Investment Hong Kong (308 HK)

China Travel International Investment Hong Kong

Miramar Hotel and Investment Company Limited, through its subsidiaries, invests in, develops, and sells properties. The Company also owns and manages hotels, operates food and beverage business, and provides travel services.

The Hongkong and Shanghai Hotels, Limited, through its subsidiaries, operates and manages hotels, food, beverage outlets, and clubs. The Company also invests in properties.

Cafe De Coral Holdings Limited, through its subsidiaries, operates quick service restaurants, fast casual dining, institutional catering and specialty restaurant chains, and food manufacturing business.

Fosun Tourism Group operates as a leisure focused integrated tourism group. The Company provides resorts management, tourism destinations development, and other related services. Fosun Tourism Group offers its services worldwide.

Regal Hotels International Holdings Limited owns and operates hotels.  The Company also manages and invests in real estate properties as well as invests in and trades financial instruments and marketable securities.  In addition, Regal hotel operates brewery, operates restaurants, and provides travel and florist and wedding services.

Sino Hotels Holdings Limited, through its subsidiaries, operates hotels and clubs.  The Company also invests in securities and provides hotel management services.

China Star Entertainment Limited, through its subsidiaries, principally engaged in the production and distribution of films and television drama series that are based in Chinese dialect. The Company also invests the gaming promotion business, property and hotel investments.

Fairwood Holdings Limited, through its subsidiaries, operates a chain of fast food restaurants.  The Company also invests in properties.

Ajisen (China) Holdings Limited operates a chain of casual restaurants that offers Japanese ramen and Japanese-style dishes in Hong Kong and People's Republic of China.

The Star Entertainment Group Limited owns and operates casinos and hotels. The Company offers services and amenities such as gaming facilities, nightclubs, bars, restaurants, exhibition centers. The Star Entertainment Group conducts business in Australia.

FUJI KYUKO CO., LTD. provides passenger rail and bus transportation and taxi services in Shizuoka, Yamanashi, and Kanagawa prefectures.  The Company leases and sells real estate, operates department store, and offers construction works. Fuji Kyuko also operates amusement parks, hotels, golf course, skiing ground, restaurants, and other leisure-related businesses.

Jack in the Box Inc. operates and franchises Jack in the Box fast-food restaurants and Qdoba Mexican Grill restaurants. The Company provides a variety of food items including hamburgers, specialty sandwiches, salads, Mexican food, finger foods, and side items. Jack in the Box offers its products and services throughout the United States and Canada.

ICHIBANYA CO., LTD. operates a chain of restaurants specialized in curry dishes nationwide.  The Company operates both franchise and directly managed restaurants.  The Company also sells its curry by mail order.

Formosa International Hotels Corporation operates hotels in Taipei.  The Company provides health club, laundry, business meeting, and other hotel services. In addition, Formosa operates restaurants, night clubs, and hotel management consulting.

Monogatari Corporation operates a restaurant chain.  The Company's restaurants include Japanese, BBQ, noodle, and Japanese-style pancake restaurant.

KURA CORPORATION operates a revolving sushi restaurant chain based in Osaka. The Company operates its own stores.

Guangzhou Lingnan Group Holdings Co. Ltd. is in the hotel management business.  The Company also provides travel, food, and exhibition   space rental services.

Tabcorp Holdings Limited operates as a holding company. The Company, through its subsidiaries, provides gambling, gaming, wagering, and entertainment services. Tabcorp Holdings serves customers in Australia and in the United Kingdom.

Emei Shan Tourism Co.,Ltd provides travel services. The Company provides scenic spot ticket sales, tourist souvenir sales, tourism hotel management, and other services. Emei Shan Tourism also operates passenger cableway management, real estate loans, and other businesses.

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)

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

Last Week in Event SPACE: China Youzan, Mcdonald's, Beijing Jingneng, Ricoh, Melco Resorts, LG Corp

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: Melco's All-Time Low As Macau Stocks Lag Las Vegas Plays

Melco is a set-up here - go Long Melco and Short MLCO. Even taking the view that sentiment/growth for casino stocks is better in the US than in...

David Blennerhassett

StubWorld: A Shot In The Arm For Gaming Stocks

Melco International Development (200 HK) is trading cheap to Melco Resorts & Entertainment (MLCO US), as Lawrence Ho continues to add to his...

David Blennerhassett

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