Hong Kong gambling giant Melco Resorts has bailed on its plan to build up a large stake in James Packer’s casino group Crown Resorts, just as a powerful local inquiry prepares to dig through the inner workings of the two companies.

Melco announced late on Thursday night it had decided not to go ahead with a deal to buy another bundle of shares in Crown from Mr Packer worth $880 million because it needed to focus on its core business in Asia, which is being hit heavily by the coronavirus crisis.

Melco agreed in May last year to pay Mr Packer $1.76 billion for a 19.9 per cent stake in Crown, to be sold in two tranches of 9.99 per cent. At the time Melco boss Lawrence Ho said he was interested in taking a controlling stake in the group.

The second tranche was put on hold after the NSW gambling regulator launched an unprecedented public inquiry into probity issues around Crown and Melco, including whether the share sale breached the terms of Crown’s Sydney casino licence.

The licence for Crown’s casino under construction at Barangaroo bans Mr Ho’s father, Stanley Ho and a number of associated individuals and companies from any involvement in Crown because of a longstanding allegation of links to organised crime.

The coronavirus crisis has hit Asian tourist numbers and led to a shutdown of all casinos in Macau, where Melco has most of its properties, and Melco said this had prompted it to reassess its business and decide not to proceed with the second tranche of shares.

“While Melco believes Crown has world-class assets that are complementary to its global business, it is Melco’s belief that, at this time, its capital needs to be deployed on its core assets,” the company said in a statement.

“Melco does not currently intend to increase its existing shareholding in Crown from its current position. Melco also does not intend to seek representation on Crown’s board.”

Mr Packer’s private company, Consolidated Press Holdings, said it had agreed to terminate the share sale agreement.

The collapse of the deal means Mr Packer will retain a 36 per cent stake in Crown casino. However, that might not last, with the billionaire having signalled he was looking to offload his investment.

Before the Melco deal, Crown was in early takeover talks with US group Wynn Resorts but that collapsed after news of the possible deal leaked to the media.

In August, Mr Packer and Melco amended their share sale agreement to make the completion of the second half of the deal contingent on the outcome of the NSW Independent Liquor and Gaming Authority inquiry.

Lawrence Ho’s Melco and Mr Packer’s Crown have a long history together, having operated a casino joint venture in Macau for 12 years until Crown ended the partnership in 2016 after 19 of its staff were arrested in China on gambling crimes.

Source: By Patrick Hatch, THE AGE