Inside Asian Gaming

September 2009 | INSIDE ASIAN GAMING 13 7 (9) Kazuo Okada Chairman, Aruze Corp Vice-Chairman, Wynn Resorts As a result of the credit crisis and slumping sales of Aruze’s pachinko and pachislot machines in its home market of Japan, Kazuo Okada’s net worth declined to US$900millionat the start of 2009, according to the Forbes.com’s ‘Japan’s Richest’ list. So though he is no longer technically a self- made billionaire, he could soon regain that mantle following recent aggressive moves to establish Aruze as a leading international slot machine manufacturer, the bounce- back in value of Aruze’s 21.8% stake inWynn Resorts and realisation of Mr Okada’s casino operating ambitions. Mr Okada built his fortune on Aruze’s success in the Japanese pachinko and pachislot machine manufacturing markets. The gaming machines using steel balls are one of Japan’s most popular forms of entertainment and Aruze is the second largest manufacturer of them. Over the years, Aruze (formerlyUniversal Distributing) has expanded into the production of other electronic gaming machines, amusement machines and video games. Early this year, Aruze Gaming acquired US gaming-machine content supplier True Blue Gaming, which is now tasked with developing content for all Aruze Gaming offices around the world. As part of the agreement, Aruze Gaming acquired the talents of Kent Young, formerly Global General Manager of Aristocrat Technologies, and game developer Scott Olive, who was responsible for creating some of Aristocrat’s most popular and innovative games. licence with the Nevada Gaming Commission (thanks in no small part to his friend Steve Wynn’s vocal support) and sells its machines in Macau, the US and Australia. In the company’s 39-year history, the Okada family has managed to retain ownership of a controlling share in Aruze, assuring Mr Okada also has the final say on his company’s future. Aruze’s 24-player baccarat machines sit on the gaming floor at Wynn Macau, and Steve Wynn honoured Mr Okada and his family by naming Wynn Resorts’ Japanese restaurants Okada. Their friendship will truly have borne fruit if Wynn Resorts and Aruze successfully gain a licence to operate a property in Japan. Aristocrat, of course, is the undisputed Asian slot market leader, though it could well lose some of its position to Aruze now that Messrs Young and Olive have joined the latter’s ranks. The value of powerful friends in the gaming industry cannot be understated, and Kazuo Okada has discovered that a friend in need is a friend indeed. His friendship with Wynn Resorts’SteveWynn has opened many doors for Mr Okada’s Tokyo-listed gaming machine supplier Azure, but it has the potential to open a much bigger door for Mr Wynn when casinos are eventually legalised in Japan. The pair’s business relationship began in 2000 when Steve Wynn was looking for new financial backers to openWynn LasVegas. Mr Okada answered his call with a substantial investment that netted Aruze the single largest stake in Wynn Resorts—although Steve and Elaine Wynn effectively own a larger overall share of Wynn Resorts through their stake in Aruze USA, it remains to be seen whether Aruze or Steve Wynn ends up with the largest stake once the Wynns’ divorce proceedings, begun in March this year, are finalised. The business ‘marriage’ between Mr Okada and Mr Wynn may not have been made in heaven proper, but it certainly offered—and continues to offer—a harmonious resolution to both men’s needs. Mr Wynn and Mr Okada’s mutual interest in expanding their gaming assets and sales globally has seen them collaborate on a number of projects, including Wynn Macau. Since October 2002, Mr Okada has served as vice chairman on the Wynn Resorts board, affording him an even greater say on the company’s future direction. Today, Aruze holds a manufacturer including Mr Lui, showed themselves willing to question received wisdom within the industry, with a focus always on fiscal caution. Evidence of this was when Galaxy decided to follow a bond issuing route to debt finance in 2005-06, at a time when banks were lining up to throw loan money at the Asian gaming sector. Galaxy’s position appeared to be vindicated earlier this year when the company was able to ‘retire’ US$170 million of bond debt by offering cash to liquidity- seeking bond holders, at a cost to Galaxy of only US$86 million—in effect a 50% discount. This happened at a time when some of Galaxy’s market rivals were stuck with covenants on bank loan debt, providing in some cases punitive penalty clauses for early payback. That, in effect, is an inevitable by-product of a system where banks borrow short at high rates and lend long. Mr Lui showed himself to be a pragmatist and also an opportunist (in the best sense), when the newly constituted Galaxy Entertainment Group made a quick entry into the Macau market by—beginning in 2004—opening a handful of casinos within hotels owned by other companies. These properties, branded City Clubs, are still operating within the Waldo, Rio, President and the Grand Waldo venues. But it was Galaxy’s flagship property, StarWorld Hotel and Casino, that really enabled the company to place its stamp on Macau’s gaming landscape. The award-winning property continues to punch above its weight, both in business performance terms and general consumer appeal, relative to the capital invested in it. Asian Gaming 50 – 2009