Inside Asian Gaming

INSIDE ASIAN GAMING | February 2011 20 Investments) and therefore controls the casino operating company SJM (Sociedade de Jogos de Macau). STDM is, in turn, effectively controlled by its largest shareholder, Lanceford. More on that in a moment. It’s worth pointing out STDM has a rich tradition of in-fighting among major shareholders. And we’re not just talking about the litigation against Dr Ho stretching from 2002 to 2008 by his sister Winnie Ho. Most of that related to the spinning off of STDM assets in the run up to the partial flotation of SJM Holdings on the Hong Kong Stock Exchange. Front man And while everyone is nowadays wonderfully exercised by the idea of Dr Ho as the great man of Macau gaming, back in 1962 he was perceived essentially as the front man for other investors whowereeitherwealthier than him, better connected with Beijing, or both. Eventually, those other investors either fell out with Dr Ho and sold out, or died off, leaving him top dog by virtue of being the last man standing. The investor with impeccable credentials among the leadership in Beijing—and more ready cash back in 1962—was Henry Fok. Unlike Dr Ho, Mr Fok was actually born on the mainland. Mr Fok proved his worth as a Chinese patriot during the Korean War from 1950-53, when he reportedly helped China circumvent Western economic sanctions. Another original STDM partner was Teddy Yip, a flamboyant Dutchman of Chinese extraction who became a successful Hong Kong businessman and who for a while in the late 1970s owned a Formula 1 motor racing team—not a cheap hobby then or now. He also encouraged the commercial development of the Macau Grand Prix. Teddy Yip was, in addition, Dr Ho’s brother-in-law, having married Dr Ho’s sister Susie. The other member of the original STDM investor quartet, Yip Hon, was a Guangdong native who worked as a Macau casino manager prior to the Second World War. He also worked as a businessman in Shanghai before returning to Macau after the Japanese invasion of China in 1937. Split In 1982, Yip Hon and Stanley Ho fell out over business matters and Yip Hon disposed of his interest in STDM. Cheng Yu-tung, founder of the Hong Kong conglomerate New World Development (and also more recently an investor in the SJM-licensed L’Arc casino), took his place. In 1986, Henry Fok also had a disagreement with Dr Ho, reportedly over the company’s business strategy and dividend policy, and he attempted to sell out. Dr Ho reportedly resisted this, and instead, Mr Fok made a gift of his stake to the Henry Fok Ying Tung Foundation in 2002. On the last man standing principle, as of February 2011, the STDM shareholders are: 1) Lanceford Company Limited: 31.6% (This was held 100% by Stanley Ho until January 2011. The ownership of the Lanceford rights is currently disputed between a number of Dr Ho’s consorts and children.) 2) Shun Tak Holdings: 11.5% 3) Winnie Ho Yuen-ki: 7% 4) Henry Fok Ying Tung Foundation: 27% 5) Cheng Yu-tung 10% 6) Others 12.9% It’s not surprising there’s been a tussle for control of Lanceford. Assuming for a moment that all the STDM shareholders have equal voting rights, and that the Hong Kong courts affirm the Pansy, Daisy and Lawrence Ho faction’s right to control (along with Dr Ho’s third consort) the Lanceford voting rights, then Shun Tak would undoubtedly vote with the Lanceford share bloc. Pansy and Daisy are managing director and deputy managing director, respectively, of Shun Tak. That would give direct ‘family’ interests 43.1%. Were Winnie Ho to vote with the other Ho family members, that would take the family over the finish line with 50.1% of STDM shares. Given her history of litigation with Dr Ho, however, her cooperation cannot automatically be guaranteed. That could then leave the balance of power with the Henry Fok Ying Tung Foundation, New World Development founder Cheng Yu-tung, and ‘Others’. Although Henry Fok’s family and the Chengs are long-standing business associates of Dr Ho, there is no guarantee they would owe the same allegiance to the above ‘bloc’ of Ho siblings. Stalemate Were Dr Ho’s fourth consort, Angela Leong, to gain control of Lanceford or its successor vehicle, that could potentially lead to stalemate at STDM, with the shareholders possibly breaking into three factions—none of them able to command a majority of votes. It may have been this fear that prompted the clinical ‘pre-emptive strike’ to inject the Lanceford share rights into Ho family-run firms Action Winner Holdings Ltd and Ranillo Investments Ltd. Action Winner Holdings Ltd is 100% owned by Dr Ho’s third consort, Ina Chan Un-chan, while Ranillo Investments Ltd is owned by Pansy, Daisy, Maisy, Josie and Lawrence Ho—Dr Ho’s five children by his second consort and second legal wife, Lucina Laam. The speed with which it was done may have related to the delicacy of Dr Ho’s health. To have delayed any longer might have been to invite claims that Dr Ho had given his consent to the transfer under duress. The fact that he subsequently appeared to revoke that Lanceford transfer consent, apparently asserting instead the right of his fourth consort Angela Leong to be consulted in the matter, put the free consent issue in the spotlight. At the time of the SJM IPO, many analysts saw that company as a play mainly for locals with insight into local business and culture. That was because of the opaque way that STDM/SJM were and are still run. Before the recent shareholding and management changes SJM Succession The late Henry Fok—richer, better connected but not necessarily a better ballroom dancer than Stanley Ho Teddy Yip passed away at the ripe old age of 96 in 2003 NewWorld order—In 1982, Cheng Yu- tung took over Yip Hon’s interest in STDM