Inside Asian Gaming

Dec 2007 | INSIDE ASIAN GAMING 43 Briefs “The court orders approving the PBL scheme and the demerger scheme will be lodged with the Australian Securities and Invest- ments Commission on Friday, 30 November, 2007,”the company said in a statement. The scheme and demerger took effect November 30, according to PBL. The first scheme allows Crown Ltd to buy all shares of PBL and the second allows Crown to spin off PBL’s media assets into a separate company. Crown’s investments will include casinos in Australia, Macau, Brit- ain and the United States, with an ongoing acquisition of Gateway Casinos in Canada in partnership with Australia’s Macquarie Bank. PBL’s media operations will go to CMH, with assets including 25% of television network Foxtel, 50% of Fox Sports, 27% of job search website Seek and 25% of PBL Media. A-Max Secures Funds for VIP Move According to a Finance Asia report, Hong Kong-listed A-Max Holdings has completed the HK$2 billion (US$257 million) fund rais- ing exercise that will mark the starting point for its move into the VIP segment of Macau’s fast-growing gaming sector. A-Max is currently a passive investor in the Greek Mythology ca- sino, sharing in revenue from some of the property’s gaming tables. With its new funds, however, it will become the single largest junket operator in Macau with a 46% share of the VIP market.The actual jun- ket operations will be carried out by an independent company called AMA, but A-Max will gain access to 80% of the revenues generated by this entity through a profit transfer agreement. Finance Asia cites industry observers as estimating A-Max will collect a margin of at least 1.4% from this business, which should make it very profitable. The deal could also be highly lucrative for Melco PBL Entertain- ment (Macau), whose Crown Macau casino will be at the receiving end of A-Max and AMA’s new business. A-Max had originally sought to raise HK$3 billion, but the initial- ly lukewarm response let to CLSA re-launching the placement at a smaller size of HK$2 billion. The lukewarm response to the original transaction was perhaps because it came too close to year-end in jittery markets and perhaps because of its sheer size—the CLSA- led placement will more than double A-Max’s current market cap of about US$200 million. Citing a source connected to the deal, the Finance Asia report postulates that “what may have won some investors over after the deal was downsized was the increased commitment by Melco PBL, which was clear evidence of the value it hopes to extract from the new business. Essentially, the Crown Macau will now pay AMA’s jun- ket operators who bringVIP clients to its casino on a daily basis rather than once a month. This will reduce AMA’s need for working capi- tal by about HK$1 billion and make sure that the business won’t be hampered by the fact that the fund raising turned out to be smaller than originally planned.” Stanley Ho Launching Long-Delayed IPO Macau casino tycoon and erstwhile monopoly operator Stanley Ho is launching the long-delayed initial public offering (IPO) of his company, Sociedade de Jogos de Macau (SJM). SJM retains the larg- est share of Macau’s casino revenue,but is facing increasingly intense completion from new operators since the end of Stanley Ho’s mo- nopoly in 2002. SJM will apply to the Hong Kong stock exchange for approval to raise at least US$1 billion, according to people familiar with the mat- ter, reports the Financial Times .The IPO, expected in January, is being arranged by Deutsche Bank, BNP Paribas and CLSA. The end of Macau’s 40-year casinomonopoly in 2002 has brought a wave of investment from some of the world’s largest gaming opera- tors, led by Sheldon Adelson’s Las Vegas Sands Corp (LVS) and Steve Wynn’s Wynn Resorts.Mr Adelson now operates the world’s two larg- est casinos—the Venetian Macao and the Sands Macao—in Macau. Other new casino operators in Macau include Galaxy Entertain- ment Group, controlled by Hong Kong property tycoon Lui Che-woo. Melco PBL Entertainment (a joint venture between Australia’s Pub- lishing and Broadcasting Ltd and Hong Kong-listed Melco,headed by Stanley Ho’s son Lawrence), and another JV between Mr Ho’s daugh- ter Pansy and US casino and entertainment giant MGM Mirage. The first Macau casino owned by Pansy Ho and MGM-Mirage is set to open on December 18. Bringing SJM to market has been complicated by a complex shareholding structure at its parent company, Sociedade de Turismo e Diversões de Macau (STDM). Mr Ho has been locked for years in a bitter STDM share dispute with his estranged sister,Winnie. It is not clear how many of the 18 casinos SJM operates will be included in the listing vehicle. Lawrence Ho Concedes Crown’s Early Mistakes Lawrence Ho, son of Macau casino tycoon Stanley Ho, admit- ted that the joint venture between his Melco International Devel- opment and James Packer’s PBL, made some early mistakes with its first casino project, Crown Macau.“Melco PBL didn’t get off to a good start,” he said. “We went away from my original vision--which was a high-roller, six-star,VIP property--and tried to squeeze in toomany slot machines”, in order to boost profit margins. “We chased that foolishly,”Mr Ho said.His comments were part of an interviewwith Forbes Asia magazine,in which he also talked about his desire to expand outside Macau and what had attracted him to the Packer partnership. “Investors don’t pay us to learn,”Mr Ho, 30, said. “The important thing is how quickly we react to these things and how we will do it next time.” Melco had responded by repositioning Crown Macau’s mass gaming market to “target the premium segment”. Melco’s next project is the US$2.1 billion City of Dreams integrat- ed casino resort.“From day one my philosophy for City of Dreams has been to be complementary to the Venetian (across the street),”Mr Ho told the magazine. “You don’t always have to go head-on. In Las Vegas, people didn’t go head-on.They said:‘Let’s adapt’. “If the Venetian wants to focus on retail conventions, we want to focus on entertainment.” Melco’s casino ambitions don’t stop at Macau. Thailand and Ja- pan are also in the frame. “We know mainland China and the politics involved,” he said. In the rest of Asia, having PBL involved is going to take us a long way.” Commenting on the Packer partnership,Mr Ho said he had joined forces with the then Publishing and Broadcasting Ltd in part because it wasn’t a US company. “Ultimately, since it (PBL) had a well-defined Asia database and offices all over Asia, it understood what we were trying to do much better, especially on the VIP end,” said Mr Ho. “The US players hadn’t really gotten their heads around Macau yet. “Culturally, they didn’t understand Chinese people.” That understanding brought Mr Ho and Mr Packer together in 2004, when they formed the Melco PBL joint venture. Following the PBL demerger, its gaming business will be held by Crown Ltd. Crown holds a 41.4% interest in Melco PBL.