April 19 (Bloomberg) -- Hong Kong tycoon Lui Che-woo plans to turn his K. Wah Construction Materials Ltd. into the city's first publicly traded casino operator by selling a Macau venture to the company for HK$18.4 billion ($2.4 billion).

K. Wah plans to pay shareholders led by the Lui family new shares and debt securities for Galaxy Casino SA, which has one of three casino licenses in Macau, the world's biggest gaming hub after Las Vegas. K. Wah said in a statement it will change its name to Galaxy Entertainment Group Ltd. and may sell shares to the public to fund a HK$5.7 billion expansion.

The deal allows Lui to take his casino business public without an initial share sale, boosting his ability to compete in the southern Chinese city with Macau's Stanley Ho, Las Vegas Sands Corp. and Wynn Resorts Ltd. Gaming revenue in Macau, the only place in China where casino gambling is legal, rose 44 percent to $5 billion last year, driven by visitors from China.

``In Macau, it's a fight for position and a fight for capital,'' said Jonathan Galaviz, a partner at Las Vegas-based Galaviz Ong & Co. and adviser to U.S. gambling companies seeking to enter Asia. ``A public listing adds a certain amount of corporate scrutiny and regulatory scrutiny and makes it easier to attract capital.''

The ability of the new company to raise funds by selling new shares may be boosted by a rally in Macau-linked stocks. K. Wah's shares soared 14.7 percent to HK$7.75 at 2:48 p.m. in Hong Kong, bringing this year's gain to 67.5 percent. Shares of Melco International Development Ltd., a Hong Kong-listed company controlled by Ho's family, have risen 4 percent this year.

Expansion Plans

Galaxy, which operates a casino in the Waldo Hotel in Macau, plans to add four casinos in the former Portuguese colony, including developments in downtown and in the Cotai area. Sheldon Adelson, chairman of Las Vegas Sands, aims to replicate the Strip on Cotai, 4.7 square kilometers (1.9 square miles) of reclaimed land.

Adelson said last month he aims to fill Cotai in seven to 10 years with casino resorts providing 60,000 rooms after Macau in 2002 ended Ho's 40-year gambling monopoly. Gaming receipts in 2004 accounted for about half of Macau's economy, which expanded a record 28 percent to 82.7 billion patacas ($10.3 billion).

The city forecasts gambling will contribute a bigger share of the economy in two years as Adelson and rivals including Las Vegas operator Steve Wynn add blackjack and roulette tables. The government said it expects 20 million visitors this year after arrivals rose two-fifths in 2004 to about 17 million.

``Everyone wants to get into Macau's gaming industry now,'' said Andes Cheng, a Hong Kong-based analyst with South China Finance & Management Ltd. ``Asian operators are up against Las Vegas competitors. They need to raise the money to build big casinos that could rival theirs.''

China Attraction

About half of the tourists in Macau came from China, the world's most populous nation. Per capita disposable income in China's urban areas, home to a third of the country's 1.3 billion people, rose 7.7 percent to an inflation-adjusted 9,422 yuan ($1,138) last year.

``We will target Chinese tourists,'' Anthony Carter, chief executive of Galaxy, said at a briefing today in Hong Kong. ``We're bringing on two more Galaxy casinos in the next nine months.''

Companies in Asia are seeking a share of a growing gambling market in Asia, where Las Vegas Sands and rival casino operators plan to spend $12 billion to build casinos to lure gamblers amid rising personal incomes and cheaper travel.

Macau's annual economic growth last year was three times the pace of nearby Hong Kong and Singapore. The only gambling allowed in Hong Kong is the lottery, soccer-betting and horse racing.

Singapore, which yesterday relaxed a four-decade ban on casinos, is considering 19 bids from companies including Las Vegas Sands and MGM Mirage to build two entertainment complexes.

K. Wah Changes Focus

UBS AG advised K. Wah on the Galaxy deal. Galaxy has posted profit of HK$72.7 million since the company began operating last July, K. Wah said. Lui, born in China in 1929, started K. Wah in Hong Kong in the 1950s by importing heavy machinery and supplying construction materials to the local market.

K. Wah said today that it plans to acquire 73.6 percent of Galaxy from the Lui family, 17.3 percent from Guoco Group, and 7 percent from Pedro Ho, a managing director of Galaxy and resident of Macau, the statement said.

K. Wah plans to issue 1.84 billion new shares for HK$8 each to finance 80 percent of the Galaxy purchase. The Lui family, with its holding companies and associates, will control 76 percent of the new company after the transactions, Galaxy said.

Macau Gambling

Daily gambling receipts in Macau last year averaged HK$140,400, compared with HK$18,720 for Las Vegas Strip and Atlantic City, K. Wah said.

Galaviz last month forecast Macau's gaming revenue may match that of Las Vegas by 2008. In the first two months of this year, Macau's gaming revenue was $831 million, compared with $947 million in the Las Vegas Strip, K. Wah said.

``Don't be surprised if sometimes within the next 10 years you hear Las Vegas referred to in America as the `Macau of the U.S.,''' Carter said.

To contact the reporters for this story: Loretta Ng in Hong Kong at lng13@bloomberg.net Le-Min Lim in Hong Kong at lmlim@bloomberg.net Joshua Fellman in Hong Kong at jfellman@bloomberg.net

Last Updated: April 19, 2005 03:01 EDT