©Getty

Crown Resorts, the casino and hotels group controlled by Australian billionaire James Packer, has sold a US$800m stake in Melco Crown Entertainment as it seeks to limit its exposure to Macau, the Chinese gaming mecca, and pay down debt.

The share repurchase agreement with Melco International — a company controlled by Lawrence Ho, the son of Hong Kong gaming magnate Stanley Ho — cuts Crown’s stake in MCE from 34.3 per cent to 27.4 per cent. Melco International will become Melco Crown’s single largest shareholder with a 37.9 per cent stake.

The sale by Crown was welcomed by investors, who pushed shares in the indebted Australian casino operator up 4.9 per cent on Thursday to close at A$12.40.

“Crown will assess its capacity to make a distribution to shareholders, and at the same time maintain a strong balance sheet and credit profile to fund existing Australian development projects, including Crown Sydney,” said Crown.

When the sale of the stake is complete, Mr Packer — one of Australia’s most colourful businessmen and son of late media tycoon Kerry Packer — will step down as co-chair of Melco and be appointed deputy chair of the Macau operator.

Crown’s representation on the Melco board will fall from three to two directors.

Over the past decade Mr Packer, who owns 53 per cent of Crown, has reaped the benefits of its Macau joint venture set up with Mr Ho.

Macau’s entertainment sector has expanded at a spectacular pace over the past 15 years, helped by the liberalisation of the gaming sector as well as soaring numbers of Chinese tourists.

But the former Portuguese colony has been dogged by the slowdown on mainland China, coupled with Beijing’s crackdown on corruption. Gaming revenues have posted year-on-year declines in every month since June 2014 as Chinese officials made a concerted effort to stamp out graft. Last year Macau’s gross domestic product shrank 20.3 per cent year on year.

Crown is selling 51.67m shares in Melco Crown at a price of US$15.50, compared with its flotation price of US$19 in 2007.

Mark Wilson, analyst at Deutsche Bank said in a note the transaction would reduce Crown’s leverage to Macau.

“We view this positively given the challenging outlook for that market,” he said.

Crown played down speculation that it would seek to exit its Macau investments, saying it “intends to maintain a significant investment in MCE” and it would initially use the proceeds of the sale to cut Crown’s debt.

This was echoed in a statement by Mr Ho, who said Melco looked forward to continuing its relationship with Crown.

Crown has endured a turbulent year due to its exposure to Macau, fast rising net debt at A$2.3bn and planning delays to its flagship Sydney casino project at Barangaroo.