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Disposal Option

Is Aruze cooler on its alliance with Wynn Resorts?

Friday, 07 January 2011 16:31
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Does Kazuo Okada know something the rest of the market doesn’t?

The announcement on 15th December tucked away in a Wynn Resorts filing to the US Securities & Exchange Commission that Aruze—Mr Okada’s gaming equipment company—may be willing to dispose of up to one million Wynn shares has certainly caught the attention of analysts.

It’s hardly likely that Mr Okada needs the money for his stalled casino project at Manila Bay in the Philippines. He’s had US$100 million in escrow parked in that scheme for the best part of two years without showing any signs of being anxious to get it back.

What other reasons could Mr Okada have for reducing his holding in Wynn? One could be concern that the recent uncertainty about land rights on Cotai and government talk of a tendering process under the new Land Law will push back the opening date of Wynn Cotai beyond the hoped for launch in 2013.

Another could be that even if Japan does pass enabling legislation for casino resorts, there is no guarantee that US-based operators such as Wynn and Las Vegas Sands Corp will be able to set up an operation there whereby they hold a majority stake.

According to a source who is an investor in Asian Gaming markets: “The Japanese are not short of cash. There are plenty of conglomerates in Japan with cash.

“They can only earn a quarter of a percent or so on their capital via the bank. Under those conditions, a project like an integrated gaming resort in Japan looks very attractive to Japanese investors. Why would they give a project like that to a foreign company? A foreign operator might be able to take a minority stake and possibly do a branding deal, but I don’t think they would ever own it. I can’t see Steve Wynn wanting to get involved in something in Japan unless he had control of it.

“A person like Kazuo Okada won’t just be sitting there waiting to see how things work out for Steve Wynn in Japan. He will be talking to his Japanese business associates and seeing if there are any strategic alliances that can be made to form a domestic consortium.

“The reason the Americans were able to write the cheques for multibillion dollar resorts in Macau is that the incumbent SJM neither had the experience of running mixed use gaming resorts, nor probably had the risk appetite to sink that much money into a still-unproven market. SJM knows casino gaming, and so far has stuck to that, though that could change if their plans for an integrated resort come to fruition.”

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