Macau casino giant Galaxy Entertainment Group is taking full possession of the Grand Waldo casino and hotel in an all-cash transaction valued at HK$3.25 billion (US$419 million).
Galaxy is buying the Cotai site and its physical plant, which are located next to the company’s Galaxy Macau flagship resort, from Hong Kong-listed Get Nice Holdings, according to statements issued by both companies.
Grand Waldo consists of 320 rooms and around 40 table games and 145 slot machines that are operated as one of four “satellite” casinos under Galaxy’s gaming concession. The property also contains 325,000 square feet of entertainment and other non-gaming space and 650,000 square feet of MICE space.
Although Grand Waldo has only a minute share of the market and operated at a HK$131 million loss last year, the acquisition is a significant one for GEG on several levels.
“Except for the existing Cotai lands that are zoned for new casino development, over the next few years, the Macau government is unlikely to allocate new land to build casinos. Having additional land bank through Grand Waldo has longer-term strategic value, in our view,” J.P. Morgan gaming analyst Kenneth Fong wrote in a note to investors today. “Besides, given that there is no more new industry supply over the next two years, purchasing a property with an existing operation would give Galaxy additional capacity (both tables and hotel rooms) for growth.”
Analyst Grant Govertsen of Union Gaming Research Macau said, “The best way to think about the acquisition is in terms of what its gaming assets could generate if they performed at least in line with Galaxy Entertainment’s existing wholly owned table games (which could require redeployment elsewhere if necessary). … Table games are a finite and scarce resource (and therefore extremely valuable) in the context of the Macau government’s market-wide cap on the number of table games.”
Hong Kong-listed Galaxy is planning a phased expansion of Galaxy Macau that will triple the size of the resort when it is completed over the next several years. The first addition, pegged at a cost of HK$19.6 billion, is slated to open in mid-2015. Construction on two subsequent phases totaling a projected capital investment of HK$50 billion-$60 billion could begin the end of this year, the company has said. Under current plans, phases 3 and 4, as these are called, will add 5,500 hotel rooms and up to 1,000 table games and 3,000 slot machines to the resort complex.
Galaxy was approved by the Macau government to add 50 table games this year between Galaxy Macau and the company’s StarWorld casino hotel on the Macau peninsula. Deputy Chairman Francis Lui has said one-third of the tables will be allocated to VIP rooms and two-thirds to the public floors.
