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MGM to Own 51% of Macau Casino’s Share

Posted on April 22nd, 2011

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Macau, a special administrative region of the People’s Republic of China, is situated along the southeastern part of Mainland China. Being a former Portuguese colony returned to China only in 1999, Macau’s autonomy will be governed by the Sino-Portuguese Joint Declaration and the Basic Law of Macau until 2049. Due to this, Macau has been blessed with a higher degree of autonomy, as compared to other Chinese cities.

Notably, Macau is the only Chinese territory where gambling is not forbidden. Since the 1850s, gambling has been considered legal in the city. It is a place wherein people can engage in gambling freely, without of fear of being arrested by the law enforcement agencies. On 2002, Macau opened its doors to the offshore companies with high hopes of raising the city’s revenues. On 2007, its revenues raised from gambling surpassed that of the Las Vegas Strip, perhaps the most popular gambling market before Macau. On 2010, Macau’s revenues coming from gambling reached to a skyrocketing $23.5 billion, a value four times bigger than the revenues collected from the Las Vegas Strip, making Macau one of the most sought after business markets in the world. In just nearly a decade, this tiny Chinese city has become the most profitable market in the entire world, most especially for the gambling industry. Nowadays, Macau has become the top destination for gamblers all over the world and for companies engaged in the gambling industry, even those from the United States of America. Moreover, the tourism brought about by the legal gambling in Macau has made it to be the top contributor for the city’s revenue.

Today, there are only a total of six companies permitted to establish casinos in Macau. Given the state of the booming gambling industry in Macau, it is not unusual for the big giants in the gambling industry of the United States of America, such as the Las Vegas Sands and the Wynn Resorts, to flock to Macau and invest in its casino industry.

A few years back, a tie up was made between American and Chinese companies engaged in the gambling industry. MGM Resorts International forged a partnership with Pansy Ho, the daughter of Asia’s biggest casino operator Stanley Ho. Together, they established their joint Macau casino venture in a 50%-50% division. Recently, another development was publicized about their joint venture: MGM Resorts International will acquire the majority of the shares of stock of the MGM China Holdings. It has been agreed upon that Pansy Ho will sell 1% of her 50% to MGM Resorts International, thus making MGM the majority stock holder. Moreover, Pansy Ho will sell her 20% shares of stock to the public, retaining only 29% of the 50% shares of stock she originally owned. The 20% from Pansy Ho’s share of stock will be made available during the initial public offering (IPO) on the Hongkong Stock Exchange, most probably by May, 2011. The profit from the IPO, which is estimated to be at $1 billion, will go to Pansy Ho. After the initial public offering, the MGM Resorts International will be the majority stock holder of the MGM China Holdings, with Pansy Ho still as the chairman and managing director.

The MGM Resorts International, founded by Kirk Kerkorian, is the world’s second largest gaming company in terms of profits. On December 2007, it extended its influence by stepping into the international arena, partnering with Pansy Ho and establishing the MGM Grand Macau, its first property outside the United States of America. Now, in 2011, the MGM Resorts International will own the majority of the shares of stock in the MGM China holdings. Despite of its descending performance in terms of acquiring revenue from its original home base, the Las Vegas Strip, its investment in the Macau gambling industry seems to be one of the best deals yet. Interestingly, a day after the deal has been sealed that MGM Resorts International will own 51% of the shares of stock, billionaire and founder Kirk Kerkorian announced his resignation from the MGM Resorts International’s Board of Directors, although he will hold the role as director emeritus and, definitely, as an adviser.