Melco Crown Entertainment said it’s buying back shares from its joint venture partner Crown Asia Investments, for about $800.83 million.
Melco is buying back 155 million shares from Crown Asia, a unit of Australia’s Crown Resorts. Following the transaction, Crown’s stake will fall from 34.3 percent to 27.4 percent, while the share of Melco International Development will rise to 37.9 percent with the public shareholding up to 34.7 percent.
The price per share will be $5.166, or about $15.50 per ADS, which is a 16 percent premium to Tuesday’s closing price.
The company, which also runs the City of Dreams Manila casino in the Philippines, intends to pay the purchase price using cash on hand and repurchased shares will be canceled in due course.
Billionaire James Packer is expected to resign from his position as co-chairman following the transaction and will become deputy chairman of the board of directors. Todd Nisbet will also resign as a director. The board will then be made up of three Melco nominees, two Crown nominees and two independents with CEO Lawrence Ho as chairman.
“Crown is strongly committed to remaining one of Melco Crown Entertainment’s major shareholders,” said Rob Rankin, Crown’s Chairman. “This transaction forms part of Crown’s ongoing capital management strategy.”
Melco ADSs are inactive pre-bell and closed at $15.25 on Tuesday near the bottom of a 52-week range of $12.05 – $24.00.
Bernstein in a note said the transaction was positive, as it’s a large share buyback representing 9.6 percent of its common stock. It also gives firm control to Ho, but may reduce the chance of a special dividend this year.
It notes that Melco maintains its strong liquidity position, with over $1 billion cash in land and $1.2 billion of capacity on a revolving loan facility.