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Why Crown Resorts’ planned share sale to China just hit a snag

The Crown Resorts Ltd (ASX: CWN) share price opened softer in early trade but has since bounced back to $12.19 per share at the time of writing. This comes after the Australian gaming and entertainment company updating the market on its planned share sale to Melco Resorts and Entertainment, a Chinese wagering group.

What did Crown announce this morning?

Through its subsidiary, Crown has this morning agreed to amend its planned share sale of 9.99% of Crown shares to Melco with the inclusion of 2 key provisions.

The first is that the inquiry by the NSW Independent Liquor and Gaming Authority (ILGA) announced on 8 August makes no adverse findings or recommendations that could block the proposed sale.

The second amendment is that Melco receives written notice from several regulators, including ILGA and its fellow regulators in Western Australia and Victoria, that it is a suitable group to manage a casino.

What’s the story with the share sale?

As announced on 30 May 2019, Crown entered into a share sale agreement to sell a 19.99% stake to China-based Melco Resorts and Entertainment, a deal which attracted a lot of attention from Aussie regulators.

The sale of the first tranche of 9.99% of Crown shares went through on 6 June 2019, but the two groups have now amended the proposed share sale for the second tranche.

This comes on the back of a period of bad publicity for Crown, with a joint Australian media investigation alleging dodgy dealings by the Aussie wagering group, which have sparked calls for a parliamentary inquiry into its activities and connections.

How has the Crown share price been performing?

The Crown share price has edged higher so far this year and is trading at $12.19 per share at the time of writing.

Despite plummeting in late July amid the allegations and intense operational scrutiny, the Crown share price has recovered in August despite a less than outstanding full-year result.

Crown reported a drop in profits as foreign gamblers were visiting its establishments less frequently and spending less money, with even its underlying results disappointing investors.

However, I think there are investors out there who think the Crown share price has been oversold in the wake of the media investigation and have been purchasing Crown shares so far this month.

I’m personally not looking to buy any Crown shares in 2019, particularly given the Crown share price is still in negative territory (excluding dividends) on a 1-year and 5-year timeline, and even since as far back as January 2008.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Crown Resorts Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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