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MGM China Gains in Hong Kong Debut After $1.5 Billion IPO

MGM China Advances in Hong Kong Debut After $1.5 Billion IPO
MGM Grand Casino resort stands in Macau. Casino gambling revenue in the former Portuguese colony surged 58 percent last year to 188 billion patacas ($23.5 billion), about four times that of the Las Vegas Strip. Photographer: Jerome Favre/Bloomberg

MGM China Holdings Ltd., the Macau venture between Pansy Ho and the biggest casino operator on the Las Vegas Strip, rose on its first day of trading in Hong Kong after raising $1.5 billion in an initial public offering.

MGM China advanced 1.8 percent to HK$15.62 after selling stock to investors in the IPO for HK$15.34, the maximum it had sought. The stock earlier climbed as much as 6 percent. Sands China Ltd. and the four other casino companies listed in Hong Kong all declined today.

Pansy Ho, a daughter of billionaire Stanley Ho, tapped into expectations that Macau’s gambling growth will continue to outpace the Las Vegas Strip’s, drawing investors including Kirk Kerkorian and billionaire John Paulson’s hedge fund. MGM China was the first $1 billion-plus IPO in Hong Kong to price at the top of its range since AIA Group Ltd. in October.

“More and more people from mainland China are going to Macau for gambling,” said Masahiko Ejiri, a Tokyo-based fund manager at Mizuho Asset Management Co., which oversees $41 billion, including shares in Hong Kong-listed companies. “Gambling companies have been doing well and have strong business fundamentals.”

Macau Casino Growth

Casino gambling revenue in the former Portuguese colony surged 58 percent last year to 188 billion patacas ($23.5 billion), about four times that of the Las Vegas Strip. Growth this year could be 40 percent, according to David Bain, an analyst with Sterne, Agee & Leach Inc. who lifted his estimate from 30 percent after Macau’s casino revenue grew 42 percent in May to 24.3 billion patacas, a fourth consecutive monthly record.

All net proceeds of the IPO will go to 48-year old Pansy Ho, who sold down her stake to 29 percent, with 1 percent going to partner MGM Resorts International. MGM China had been a 50-50 joint venture between Ho and Kerkorian’s MGM Resorts.

The Las Vegas-based company now owns 51 percent of MGM China, enabling it to book profits from the Macau operations.

Pansy Ho told reporters in Hong Kong today that she’s “unlikely” to sell more shares in the venture. Today’s gain gave MGM China a market value of HK$59.4 billion (7.6 billion).

Melco, Galaxy

Melco International Development Ltd., whose chairman and biggest shareholder is Pansy Ho’s brother Lawrence Ho, slid 5.9 percent to HK$7.40. Melco International, which has gained 67 percent this year, has a Nasdaq-listed venture with Australian billionaire James Packer, Melco Crown Entertainment Ltd.

Galaxy Entertainment Group Ltd., part-owned by Permira Advisers LLP, dropped 5 percent to HK$16.86, trimming its gain this year to 95 percent.

Bank of America Corp., JPMorgan Chase & Co. and Morgan Stanley are the global coordinators for the MGM sale, according to the prospectus. BNP Paribas, CLSA Ltd., Deutsche Bank AG and Royal Bank of Scotland Group Plc are joint bookrunners, the document shows.

Ho’s 89-year-old father held a gambling monopoly in Macau for four decades before the government in 2002 allowed the entry of foreign companies including Las Vegas Sands Corp. and Wynn Resorts Ltd.

Paulson & Co., the $36 billion hedge fund founded by Paulson, agreed to buy $75 million of shares in MGM China’s initial offering, according to the prospectus. Kerkorian and a trust fund controlled by Hong Kong property magnate Walter Kwok also committed to buying stock, the prospectus showed.

SJM, Sands China

Casino revenue in Macau climbed 43 percent to 79 billion patacas in the first four months of this year, according to data from Macau’s Gaming Inspection and Coordination Bureau. Macau gambling revenue may rise more than 25 percent in 2011, cementing the city’s position as the world’s biggest gambling hub by sales, Standard & Poor’s credit analyst Joe Poon said in a report.

SJM Holdings Ltd., Asia’s biggest casino company by sales, slid 4 percent to HK$18.18 in Hong Kong trading, paring its gain this year to 49 percent. The benchmark Hang Seng Index retreated 0.3 percent.

Wynn Macau Ltd., a unit of the casino operator founded by billionaire Steven Wynn, declined 3.9 percent to HK$24.80. Sands China Ltd., the Macau unit of billionaire Sheldon Adelson’s Las Vegas-based casino company, fell 1.3 percent to HK$19.78.

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