Billionaire Sheldon Adelson’s Sands China Ltd. fell the most in three weeks after investor Waddell & Reed sold a $1.38 billion stake and moved its position to the Macau casino operator’s parent company.
Sands China declined 2.1 percent, the most since May 8, to HK$57.05 at the close in Hong Kong trading. Waddell & Reed sold its shares at HK$55.45 each, or a 4.8 percent discount to yesterday’s close, according to a term sheet obtained by Bloomberg News.
Investors including Waddell & Reed are selling their holdings in the Macau casino operator for a stake in its parent company Las Vegas Sands Corp., which also runs casinos in Singapore and is planning projects in Japan outside its home base in the U.S. The Hong Kong-listed unit, whose revenue accounted for more than 60 percent of the group, reported a 50 percent increase in first-quarter earnings.
“I don’t think that means the fund is turning less bullish on Sands China,” Alison Law, head of consumer research at Daiwa Securities Co. Ltd., said by phone today. “It looks like the fund is diversifying as LVS offers it an opportunity to invest in Singapore, the gradually-recovering Las Vegas and possibly new markets, like Japan.”
The investors are swapping the stakes because of “the greater market liquidity of Las Vegas Sands compared to Sands China,” according to a Business Wire statement. “They continue to have a positive view on the investment outlook of Las Vegas Sands and its ability to generate revenue in China and elsewhere around the world.”
The investment switch is taking place as Macau regulators and the police crack down on attempts by gamblers to circumvent Chinese currency controls. Macau police have made 12 arrests involving pay card fraud cases in February and March. Funds obtained illegally through card-swiping by Chinese gamblers come to an estimated $6 billion, according to Deutsche Bank AG.
Sands China hasn’t heard from regulators on the crackdown and doesn’t expect possible government action would affect gaming revenue, Chief Executive Officer Edward Tracy said this month.
Net income at the Las Vegas-based company grew 36 percent to $776.2 million in the first quarter as its Macau casinos added shopping malls, hotel rooms and entertainment shows to capture more Chinese gamblers vacationing in the world’s biggest casino hub. Sands China posted a 50 percent gain in first-quarter earnings.
Adelson said in February Las Vegas Sands is ready to invest $10 billion in Japan, projected to be Asia’s second-largest casino market. Japan currently bars casinos in the country and lawmakers are pushing to open up the market.
Bank of America Corp.’s Merrill Lynch & Co. unit is the sole bookrunner on the deal, according to the terms.