'UNDERVALUED' CROWN RESORTS SPLITS BUSINESSES
Written on the 15 June 2016
JAMES Packer's Crown Resorts (ASX:CWN) will divide its international assets and Australian casinos into separate investment vehicles to bolster the company's share price.
Crown will explore a potential IPO of its Australian hotels in a property trust, except Crown Towers Melbourne, with the company retaining a 51 per cent interest.
The demerger will combine the company's casino hotels in Melbourne and Perth, proposed Sydney project, Crown Aspinalls in London and the online wagering business.
The new international listed company will comprise Crown Resort's 27.4 per cent interest in Melco Crown Entertainment (MCE) in Asia, Alon hotel and casino development in Las Vegas, 20 per cent stake in restaurant chain Nobu, 50 per cent holding in casino operator Aspers in the UK and investment in Caesars Growth Partners.
Crown raised US$800 million last month after reducing its shareholding in Melco Crown, which operates three casinos in Macau and one in the Philippines.
Crown Resorts chairman Robert Rankin says the initiatives have been designed to maximise shareholder value and streamline the company's ownership structure.
"The board has for some time been looking to address what we believe to be a material undervaluation by the market of Crown Resorts' assets, due to a traditional consolidated or amalgamated structure," Rankin says.
"In particular, we believe that Crown Resorts' extremely high quality Australian resorts are not being fully valued and the Crown Resorts share price has been highly correlated to the performance of its investment in Macau.
"The proposed demerger reflects the different nature of Crown Resorts' controlled Australian operating assets from its international investments. It will provide investors with greater investment choice and transparency on the underlying quality of all of Crown Resorts' assets."
Crown also announced it has adopted a new dividend policy to pay 100 per cent of normalised net profit after tax, which will apply to the final dividend for FY16 in October.
"Crown Resorts' revised dividend policy is expected to provide increased cash returns to our shareholders and reflects the strong earnings and cash flow generating capacity of Crown Resorts' business and the company's conservative balance sheet gearing following the sale of part of its MCE shareholding," Rankin says.
The company invested $752 million into MCE and has received cash returns totalling $1.4 billion, including the reduction of its shareholding and $327 million in dividends. Based on the current MCE share price, Crown's investment is valued at $2.7 billion.
Packer will no longer be employed as a senior executive following his resignation as chairman last August, but will continue as deputy chairman of MCE.
Following the demerger, Rankin will be chairman of both companies.