Ho will sell 1 percent of MGM China Holdings Ltd. to Kerkorian’s company, lifting his stake in the venture to 51 percent, the companies in a statement yesterday. Ho also plans to sell as much as 23 percent of the business in a Hong Kong initial public offering.
Majority control will enable MGM Resorts to consolidate the Macau operation on its books and take advantage of a gambling destination where revenue is four times that of the Las Vegas Strip. Ho’s sale follows a family dispute that ended with her and some family members getting a stake in the company that controls SJM Holdings Ltd. (880), which her father built into Asia’s biggest casino operator.
“Everyone will be a bit relieved now as the control from Pansy is reduced after what happened to the Ho family,” Gabriel Chan, a Hong Kong-based consumer and gambling analyst for Credit Suisse Group AG, said in by phone today. “The structure is different from what the market expected.”
Shun Tak Holdings Ltd. (242), a property developer that also operates ferry services from Hong Kong to Macau, rose as much as 8.9 percent to HK$4.90, the biggest intraday gain in four months. Ho is managing director of Shun Tak, which traded at HK$4.84 as of 3:07 p.m. Hong Kong time.
Ho, a daughter of casino billionaire Stanley Ho, will also purchase $300 million of MGM Resorts’ convertible senior notes due 2015. The agreements are subject to regulatory approval and the IPO should be completed by June 30, MGM Resorts said. Ho wasn’t available for comment.
MGM Resorts, the largest casino operator on the Las Vegas Strip, climbed $1.09, or 8.6 percent, to $13.70 in New York Stock Exchange composite trading. The gain was the biggest in five months.
Sands China Ltd. (1928), the Macau unit of billionaire Sheldon Adelson, led Hong Kong-listed casino operators higher today, gaining as much as 5.3 percent to HK$20.70, an intraday record, before trading at HK$20.40 as of 3:07 p.m. local time.
MGM Resorts’ half stake in the venture with Ho delivered $129.6 million operating income in 2010. The company follows Wynn Resorts Ltd. (WYNN) and Las Vegas Sands Corp. (LVS) in listing a minority stake in its Macau venture.
‘Growing so Rapidly’
“Ownership in a property in Macau is the last thing any casino companies want to give up at this point, because it’s growing so rapidly and it’s been so profitable,” David Katz, a New York-based analyst at Jefferies & Co., said in a phone interview yesterday. Katz recommends owning MGM Resorts’ stock and has a price estimate of $17 on the shares.
MGM Resorts has lost 9 percent of its market value over the past year, compared with an 84 percent gain for Las Vegas Sands and a 56 percent increase for Wynn Resorts.
Casino gambling revenue in Macau soared 58 percent last year to 188.3 billion patacas ($23.5 billion), about four times more than the Las Vegas Strip, according to government data. The gains continued in the first quarter with a 43 percent surge.
The Macau casino repaid $192 million in loans to MGM Resorts last year.
The partners previously announced plans to develop a second Macau casino on the Cotai Strip, an isthmus of reclaimed land connecting two offshore islands in the former Portuguese colony.
MGM China is one of six licensed Macau casino operators. It competes with Sands China, Wynn Resorts’ Wynn Macau Ltd. (1128), and Asia-based Melco Crown Entertainment Ltd. (MPEL), Stanley Ho’s SJM Holdings Ltd. and Galaxy Entertainment Group Ltd. (27)
SJM, which runs most of Macau’s 33 casinos, rose 1.5 percent to HK$16.22 in Hong Kong trading and has more than tripled in value over the past year.
Stanley Ho gave up almost all his holding in Sociedade de Turismo e Diversoes de Macau SA to resolve a family dispute that led to two lawsuits. Pansy Ho and some family members got 25.538 percent of STDM, as the company is known, while SJM Managing Director Angela Leong On Kei, mother of Ho’s youngest children, was given 6 percent. STDM owns 56 percent of SJM, according to data compiled by Bloomberg.
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