By Prudence Ho and Kate O’Keeffe
Of DOW JONES NEWSWIRES
HONG KONG (Dow Jones)–MGM China Holdings Ltd., a casino joint venture between Las Vegas based-MGM Resorts International (MGM) and a daughter of gambling tycoon Stanley Ho, is now aiming to raise up to US$1.5 billion in a Hong Kong initial public offering, a person familiar with the situation said Monday.
The top end of the current fundraising goal of US$1 billion to US$1.5 billion implies the company is now looking to raise up to three times the amount it had previously sought. People familiar with the matter had earlier said the company wanted to raise US$500 million in a 2010 listing.
The revised price range comes on the heels of yet another record-breaking gambling revenue haul in Macau. Government statistics released last week show Macau raked in US$2.56 billion in gambling revenue last month, a 45% on-year rise which puts the Chinese territory on track to generate five times the gambling revenue of the Las Vegas Strip this year.
Nomura analyst Charlene Liu said MGM China’s preliminary prospectus revealed a balance sheet that was “much healthier than expected.” She wrote in a report last month that the entity will likely trade at a discount to its U.S. peers in Macau, Wynn Macau Ltd. (1128.HK) and Sands China Ltd. (1928.HK), as the former is more profitable and the latter has a stronger project pipeline. But she said there is a “good likelihood” investors might switch out of rival Melco Crown Entertainment Ltd. (MPEL), which she calls “the other Macau joint venture with a highly visible turnaround story,” to fund positions in the new listing. Melco Crown, co-chaired by Stanley Ho’s son Lawrence and Australian James Packer, also has a market cap, market positioning and valuation that are very similar to MGM China’s, she said.
MGM China has begun pre-marketing for the deal and aims to launch its roadshow on May 17 and start its Hong Kong retail offering on May 23, the person said.
During pre-marketing, a company and its bankers gauge investor interest in an IPO and decide on a price range for the deal. The roadshow is the official bookbuilding period when a final price is set.
The person added the company aims to list on the Hong Kong stock exchange on June 3.
Under a deal announced last month, MGM Resorts International will get 51% ownership of MGM China after the venture’s IPO. Partner Pansy Ho will retain a 29% interest in the public company, with the remainder sold to the public and the proceeds going to entities controlled by Ms. Ho. The two partners currently each hold a 50% stake in MGM China, which made a HK$1.57 billion net profit in 2010, reversing a HK$167.13 million loss in 2009.
Wall Street analysts have hailed MGM Resorts’ plans to take a controlling stake in the Macau operator, saying it will give the debt-laden U.S. casino operator more exposure to the profitable Macau market and management control over the venture.
The listing plan also 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.
Wynn Resorts Ltd. (WYNN) and Las Vegas Sands Corp. (LVS) both listed their Macau assets in Hong Kong in 2009, forming Wynn Macau and Sands China.
Shares in those two companies rose over 80% last year, outperforming Hong Kong’s benchmark Hang Seng Index’s 5% rise.
The three other casino operators in Macau are Melco Crown, Stanley Ho’s SJM Holdings Ltd. (0880.HK) and Galaxy Entertainment Ltd. (0027.HK), controlled by the family of Hong Kong tycoon Lui Che Woo and set to expand its presence by opening a nearly US$2 billion casino-resort May 15.
J.P. Morgan Chase & Co., Bank of America-Merrill Lynch, Morgan Stanley are the bankers on the deal, the person said.
