The global casino and entertainment industry is now starting to feel the impact of the ongoing coronavirus epidemic. A major M&A deal between Macau-based Melco Resorts & Entertainment Ltd  and Australia’s Crown Resorts Ltd has now been terminated as the virus continues to spread on a global scale, claiming hundreds of lives.
With casinos ordered to suspend their operations in Macau, companies are recording huge losses. Wynn Resorts for example is reporting losses of up to $2.6 million a day.
Crown Acquisition Deal Dropped
Melco’s planned stake purchase in Crown will now not push through, as the casino operator continues to deal with the impact of the coronavirus outbreak which began in Wuhan City, in the Hubei province of China.
The acquisition deal between Melco and Crown was announced in May 2019, valued at $1.2 billion. The first tranche of the deal was completed in June 2020, which saw Melco acquiring a 10% stake in Crown. A regulatory assessment prompted a delay in the acquisition of the remaining 9.99% stake, and now it’s been announced that both Melco and Crown have mutually decided to drop the deal due to the economic impact of the coronavirus epidemic.
Analysts had initially predicted Melco CEO Lawrence Ho will fully acquire Crown Resorts from Australian casino magnate James Packer in the near future, but that assumption has now been squashed. Melco’s operations in Macau have been directly hit by the ongoing casino shutdown in the city, costing the casino operator and the industry as a whole, billions of dollars of lost revenue.
Australia also recently imposed travel restrictions to foreign nationals traveling from China, also affecting the flow of gamblers into casinos owned by Crown.  Melco said it will reassess all its non-core investments this year and will focus more on its operations in Asia.
The death toll from the coronavirus has now topped 900, most from China, with more than 40,000 confirmed infections worldwide.
Multi-million Losses Due to Macau Shutdown
The coronavirus epidemic has forced flight cancellations and travel restrictions all around the world, resulting in a significant drop in tourism figures in Chinese regions. The casino industry in particular has been dealt a huge blow after Macau, the world’s gambling capital, enforced suspension on casino operations to prevent the virus from spreading further. The Chinese city has so far recorded 10 confirmed cases of infection.
Among the companies reporting major losses owing from the ongoing outbreak is Wynn Resorts, which operates the Wynn Macau. The hotels at Wynn Palace on Cotai as well as Wynn Peninsula, are still open to cater to few remaining guests in the city.
During Wynn’s fourth quarter conference call last week, it was revealed that the company is losing between $2.4 million and $2.6 million per day, most of which accounts for payroll for the more than 12,000 staff the company currently employs in China.
These losses would not be covered by business interruption insurance as they do not fall under the physical event criteria, like hurricanes or fires. This means Wynn would have to continue incurring the massive loss as it remains unclear when the suspension order will be lifted for casinos to resume operations.
Macau Tourism Set For Rebound  -Maddox
While this is certainly a negative development for Wynn, CEO Matt Maddox said the health and safety of their employees is their top priority right now. The casino shutdown was ordered in Macau after a hotel worker was diagnosed with the virus.
Wynn’s latest financial report has been bleak, with its Macau operations recording an 11.7 per cent year on year drop. Casino revenues are also down 15.2 percent in the final quarter of 2019, compared with the same period in 2018. Overall profit for Wynn Macau suffered a 2.1 percent decline for the said quarter. Total net loss for the company amounted to $72.9 million for the fourth quarter of 2019.
US financial services firm Jefferies Group predicts Wynn Resorts could be in for some more financial uncertainties even after the coronavirus outbreak subsides. Maddox is optimistic though, saying the virus is well contained in Macau, and tourism in the city will definitely rebound and get back to normal soon.