Inside Asian Gaming

INSIDE ASIAN GAMING | March 2012 20 In Focus waiting for confirmation of the previously stalled Studio City project—to start vigorously lobbying the Macau government on the topic, they may simply be addressing their concerns to the wrong people at the wrong moment. Wynn Resorts has been at pains to point out that a 3rd March filing to the New York Stock Exchange stating that Wynn had received ‘gazetting’ of its Cotai land concession contract by the Macau government (technically the final stage of approval before construction can go ahead) was actually a clerical error. Inside Asian Gaming has no reason to doubt that explanation. But even if one of the Cotai land applicants—possibly under pressure from shareholders and market makers— were minded to apply pressure to the Macau government, not only is it likely to be counterproductive as simply the ‘wrong’ way to go about business in China, but it might actually achieve the spectacular own goal of offending Chinese officialdom in general while addressing the wrong audience in particular. Even assuming for a moment that the ‘big picture’ issue of when to allow further expansion of Macau’s gaming industry on Cotai is in the hands of Beijing rather than Macau, the concessionaires’ relationships with the territory’s government are still important and could have an influence on the timing of individual projects. Fewer than six months ago it seemed that Steve Wynn was a clear leader in the race to lawyers in its tussle with Mr Okada. But it is unlikely to endear either party to the Chinese authorities, where the powers and privileges of those in authority are rarely exposed to public scrutiny. Old times Back in 2008, during happier times, Mr Wynn was quoted as saying: “I love Kazuo Okada as much as any man that I’ve ever met in my life. He’s my partner and friend. And there is hardly anything I won’t do for him.” Times change. People change. But Chinese officials might be forgiven for wondering how exactly it will benefit them to be Mr Wynn’s friend in the current situation. Nor will it garner much sympathy among the public in Macau and China as a whole that two very rich men now feel hurt and betrayed by each other. Whether one views the dispute from the position of the public good or from the position of the investor, it’s hard to see a ‘victim’ in this situation. Despite Mr Okada’s complaint filed recently in a US District Court in Nevada about the “unjust and improper redemption of [Wynn] shares owned by Aruze USA, Inc., at a 30% discount”, a fact easily overlooked is that even at the discounted price, Mr Okada has tripled the value of his investment inWynn during the time his money has been in the company. And by taking Mr Okada’s shares off the table and replacing that loss of equity capital by issuing bonds, Mr Wynn has also created more concentrated value for the remaining shareholders (including him). Like two students fighting in the school yard during break—and in likelihood urged to action by their respective legal teams—it seems both Mr Wynn and Mr Okada have lost sight of the bigger picture. This is that no matter who wins the fight, it’s not going to help either of them graduate from the high school of Chinese public opinion. Ultimately, the difficulty may be that Western-focused investors in Asian casino markets have two very different groups of people to convince regarding their leadership skills—the folks back home, and the folks back here. The skills needed to address the two communities are very different. But when your core operation is listed in NewYork and regulated in Nevada rather than in Asia, then the temptation is always to please the home team first—even if it’s at the expense of alienating the very people who can make most money for you in the long run. Best of enemies—SteveWynn and Kazuo Okada win hearts and minds in Macau, armed with undeniable personal charm and having learned quickly how to go about business in China. In the second half of 2011, Wynn Resorts announced a HK$1 billion (US$128.3 million) donation to the University of Macau Development Fund for its new campus on Hengqin island next door toMacau—to be spread over 11 years. While the donation was not itself a quid pro quo payment on the understanding of a Cotai approval, Mr Wynn and his board must have felt confident the goodwill created by such a gesture would smooth his path. But like the proverbial hare and tortoise race, Wynn’s apparent early lead now looks to have evaporated—partly through missteps and partly through circumstance. It’s a truism of doing business in China that the less public noise you make in advance of a deal the better. In the Cotai approvals context, the recent falling out between Mr Wynn and his former business partner Kazuo Okada—apparently over how to deal with the issue of investment (or not) in the Philippines—is a veritable St Patrick’s Day Parade of publicity; brash, loud and as ugly as a red-haired leprechaun comedy wig. Going public with details of how much the wife of an official from the Philippine Amusement and Gaming Corporation reportedly spent on tick during a visit to Wynn Macau— while a guest of Mr Okada—may be considered a legitimate tactic by Wynn’s