Shashwat Awasthi, Byron Kaye

SYDNEY, (Reuters) – Australia’s Crown Resorts was disqualified from holding a Victoria gambling license on Tuesday. However, it was permitted to run its main Melbourne casino with supervision. This raises hopes about its future earnings and potential takeover targets.

In a Tuesday report by the Victorian government, the Royal Commission inquiry deemed Crown’s actions “disgraceful”, after months of hearings in which the company was charged with enabling money laundering.

James Packer (37% owned by the billionaire) had engaged in illegal, dishonesty, unethical, and exploitative acts. It was difficult to believe that such well-known corporations could engage in certain actions.

Instead of closing down the casino’s flagship, the inquiry recognized the board’s reform efforts. It recommended that it be permitted to keep the resort open for two additional years with supervision.

The report recommended that the maximum punishment for wrongdoing in casinos be increased to A$100million ($75 million) and Packer’s holdings to be reduced to 5% by September 2024. This would mean Packer must sell 32%.

Packer’s spokesperson was unavailable for comment immediately.

Crown investors felt relief after seeing takeover offers evaporate. The company’s stock price plunged as it braced to lose their full license at Crown’s Melbourne resort. This resort generates three-quarters its profits.

Crown shares rose 11% on Tuesday morning before stabilizing at 9% mid-session. This was in contrast to a slightly lower overall market.

Star Entertainment Group Ltd shares rose, as did the share prices of its smaller competitor Star Entertainment Group Ltd. Star had abandoned a Crown purchaseout plan due to uncertainty over Crown’s fate. Star Entertainment Group Ltd is currently under investigation for similar issues and has not yet responded to our request for comment.

John Ayoub (a Wilson Asset Management portfolio manager) said that “with a little more regulatory certainty now people can run the rulers” and they could see what their value is again. Wilson Asset Management has Crown shares.

Crown has a long path to go in this remediation process.

Nathan Bell, a portfolio manger at Investsmart which holds Crown shares said the company had a pivotal role to play in Victoria’s economy. “The fact Crown’s key board member and CEO departed could have been a help for it getting a second chance.”

Crown Victoria, the largest employer at one site, with over 11,500 workers in Melbourne, has elected to replace its chairman, CEO and most of its senior management. This was after its three state regulators opened inquiries into Crown’s governance in 2020.

After a New South Wales inquiry, Packer was also found to have improper influence.

“STRINGENT OVERSIGHT”

Melissa Horne (victoria’s minister of gaming regulation) stated that the state government will accept the recommendations in the entire report.

“We have the highest standards of oversight for any casino in this country. Horne stated that Crown will no longer be Crown’s fate. Horne spoke to reporters in Melbourne.

The state added that an independent manager could inspect and investigate the affairs of Melbourne’s casino, assist at board meetings and examine all documents and records.

Managers could have direct control over the board or veto their decisions.

An earlier inquiry in NSW resulted to Crown’s licensing for a new A$2.1billion Sydney casino tower. An ongoing third investigation into Crown’s Perth casino is underway.

Like the two other inquiries, the Melbourne inquiry heard details about Crown money laundering activities and regulatory failures.

($1 = 1.3398 Australian dollars)