MGM MGM Resorts International

MGM Resorts International (MGM) said it reached an agreement with Macau mogul Pansy Ho that will give the U.S. casino operator a majority stake in its Chinese joint venture after the venture's planned initial public offering.

The move is being hailed as a savvy one by Wall Street analysts as the deal gives MGM Resorts a slightly bigger piece of the pie in its profitable Macau casino while getting more cash to pay down debt. What remains unclear is how the role of Ho, whose stake is being diluted through the IPO, will be impacted.

"This is a good business decision for them," said Dennis Forst, an analyst at Keybanc Capital Markets. "They don't give up ownership in Macau, one of their very best assets and ... (MGM) improves their balance sheet slightly."

Under the deal, MGM Resorts will have 51% ownership of MGM China Holdings Ltd. after its IPO on the Hong Kong Stock Exchange, according to MGM Resorts International. Ho will retain a 29% interest in the public company, with the remainder sold to the public.

MGM and Ho have split ownership of the joint venture equally.

In exchange, Ho will buy $300 million of MGM Resort's convertible senior notes on terms similar to its existing 4.25% convertible senior notes due 2015, it said. She will be buying the notes at a 3.8% premium, which translates into $311 million in proceeds for MGM Resorts.

Carlo Santarelli, an analyst at Wells Fargo Securities said MGM's deal lessens the possibility that its Macau IPO will disappoint. "In our view, we believe investors will be pleased with the new structure. We think the ability to consolidate the MGM China results could potentially unlock some equity value," he wrote in a report.

In the wake of the announcement, MGM's stock rose 6.98% to 13.5% in recent trading.

A date for the share sale hasn't yet been set but is expected in May. The IPO could raise around US$1 billion, a person familiar with the situation said earlier this month.

MGM Resorts has benefited from its joint venture with the daughter of local kingpin Stanley Ho as revenue in Las Vegas remains sluggish. Macau overtook the Las Vegas Strip as the world's biggest gambling market in 2006 and last year raked in about four times the Strip's revenue.

Proceeds from the offering will go to a Ho-controlled entity and help fund her purchase of MGM Resort's notes. MGM Resorts will receive net proceeds from the debt sale but not from the IPO, it said.

MGM China, which operates the MGM casino in Macau, will seek listing approval from the Hong Kong exchange's listing committee in April, the person said earlier this month.

MGM has lagged U.S. rivals Wynn and Sands in terms of market share in Macau but has been increasing its share of the pie in recent months. Some competitors have accused the operator of buying business by paying higher commission rates to the middlemen who bring high rollers to Macau casinos, but the company has attributed the recently better market share to a genuine business improvement.

It is awaiting land rights to build another property in the territory's Cotai area, home to Las Vegas Sands' Venetian, the world's largest casino. Galaxy is set to open a US$1.9 billion casino-resort there May 15, while Sands, Wynn and SJM also have plans to expand there.

The listing plan comes after the March settlement of a months-long family feud for control of Stanley Ho's multibillion-dollar gambling empire. A family feud burst into the open earlier this year when the gambling tycoon accused the children of his second wife, including Pansy Ho, of colluding with his third wife, Ina Chan, to steal a company that held the bulk of his assets. They denied his accusations. The dispute was eventually resolved, and Stanley Ho dropped his lawsuit against his family members.

-By Drew FitzGerald and A.D. Pruitt, Dow Jones Newswires; 212-416-2909; Andrew.FitzGerald@dowjones.com

MGM Resorts (NYSE:MGM)
Gráfico Histórico do Ativo
De Jun 2024 até Jul 2024

MGM Resorts (NYSE:MGM)
Gráfico Histórico do Ativo
De Jul 2023 até Jul 2024