MGM China IPO

Appealing. Pity this MGM China IPO is not offered on the Singapore Stock Exchange. Well, it's time to relook at Genting Singapore shares then. The excitement of this IPO may have reached--and thus, shall affect very positively--to Genting Singapore. Heh.

A Macau joint venture of MGM Resorts International of Las Vegas hopes to raise up to US$1.5 billion in an initial public stock offering on the Hong Kong Stock Exchange on June 3, the company announced in US regulatory filings.

MGM China Holdings Ltd is marketing 760 million shares for a 20 per cent stake in the Chinese casino operator at a price ranging between HK$12.36 (S$1.97) and HK$15.34, MGM Resorts said in a notice to investors on Monday.

After the IPO, MGM Resorts International would hold 51 per cent of MGM China and its partner Pansy Ho would hold 29 per cent. The remaining 20 per cent stake will be sold to the public, with proceeds going to entities controlled by Ms Ho. MGM Resorts and Ms Ho each currently hold a 50 per cent stake in MGM China.

MGM Resorts has existing ties in Macau with the Genting Group, which owns Resorts World Sentosa in Singapore. Genting Hong Kong also owns a VIP room, which it opened under the Crocksford brand in 2010 at MGM Mirage's casino in Macau.

Genting Group's units Genting Bhd and Genting Malaysia invested US$50 million each in senior secured notes issued by MGM Resorts in May 2009.

The commercial paper consists of two equal tranches with yields of 10.375 per cent (due May 2014) and 11.125 per cent (due November 2017). The bonds are secured against MGM's Bellagio Hotel & Casino and The Mirage Hotel and Casino in Las Vegas.

According to the Wall Street Journal, which cited a draft prospectus of MGM China's IPO in a report on Tuesday, Kirk Kerkorian, MGM Resorts founder and its largest shareholder through his company Tracinda Corp; US hedge fund firm Paulson & Co; property developer Asia Standard International and Hong Kong real-estate developer Walter Kwok's family trust are among several cornerstone investors of the Macau casino operator's IPO.

Cornerstone investors are guaranteed large allotments in an IPO in exchange for agreeing to hold the shares a certain length of time.

According to MGM Resorts in its first-quarter earnings report released earlier this month, Ms Ho plans to buy US$300 million worth of MGM Resorts' debt in the principal amount of MGM Resorts' 4.25 per cent convertible senior notes, which are due 2015.

MGM Resorts told investors that MGM Macau is well positioned as Macau is already the world's largest gaming market and is 'fed by a sizeable, under-penetrated population that is rapidly experiencing a substantial wealth increase'.

MGM China, whose Macau assets include a casino and a luxury hotel resort, returned to the black in 2010 with a net profit of HK$1.57 billion (S$251 million) compared with a net loss of HK$167.1 million in 2009, according to its listing document.

As at December, MGM Macau had about an 11.4 per cent market share in terms of revenue among the 33 casinos in Macau, the company said.

Separately, HSBC analyst Sean Monaghan said Genting Singapore investors may be concerned about its slower mass and VIP gaming growth in its latest first-quarter earnings report, but that could be offset by improving sentiment on the possibility that Singapore could license several small junket operators over the next two to six months.

From Business Times, "MGM China to raise US$1.5b in June IPO".

U.S. hedge-fund firm Paulson & Co. and investor Kirk Kerkorian are among four cornerstone investors in an initial public offering of Macau casino operator MGM China Holdings Ltd. that aims to raise up to US$1.5 billion, a draft prospectus shows.

Hedge-fund manager John Paulson's firm plans to invest up to US$75 million in the casino joint venture between Las Vegas based-MGM Resorts International and Pansy Ho, a daughter of Macau gambling tycoon Stanley Ho, the document said. Paulson & Co. is MGM Resorts International's second-largest shareholder with an 8.96% stake.

Mr. Kerkorian has agreed to subscribe for up to US$50 million worth of shares in the new listing through his investment company Tracinda Corp. Tracinda is the largest shareholder in MGM Resorts International with a 26.85% stake.

Cornerstone investors are guaranteed large allotments in an IPO in exchange for agreeing to hold the shares a certain length of time, in this case for six months. They are commonly sought out in Hong Kong as a means of attracting other investors to an IPO and creating a sense of scarcity for the remaining shares.

All told, the four cornerstone investors are investing as much as US$190 million in the MGM China IPO. The others are property developer Asia Standard International, controlled by Hong Kong businessman Poon Jing, which has pledged to invest up to US$40 million. A company owned by Hong Kong real-estate developer Walter Kwok's family trust will chip in up to US$25 million. Mr. Kwok is the former chairman of blue-chip developer Sun Hung Kai Properties Ltd.

MGM China is seeing as much as 11.66 billion Hong Kong dollars for the June 3 listing by offering 760 million shares at an indicative price range of HK$12.36 to HK$15.34 per share, according to a term sheet seen Tuesday. The firm began taking orders for shares from institutional investors on Tuesday, and a person familiar with the situation said Tuesday that shares marketed to institutional investors were fully subscribed on the first day.

MGM China, whose Macau assets include a casino and a luxury hotel resort, swung to the black in 2010 with a net profit of HK$1.57 billion (US$201.88 million) compared to a net loss of HK$167.1 million in 2009, according to its listing document.

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. The Chinese territory raked in US$2.56 billion in gambling revenue last month, a 45% jump from the year earlier. MGM China has lagged U.S. rivals Wynn Resorts Ltd.'s Wynn Macau Ltd. and Las Vegas Sands Corp.'s Sands China Ltd. in terms of market share in Macau but has been increasing its share of the pie in recent months.

The company's listing plan comes after the March settlement of a months-long family feud for control of Stanley Ho's multibillion-dollar gambling empire. A dispute 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.

Under a deal announced last month, MGM Resorts International will have a 51% stake in MGM China after the joint venture's IPO. Joint-venture partner Pansy Ho will have a 29% interest in the public company, and the remaining stake will be sold to the public, with the proceeds going to entities controlled by Ms. Ho. The two partners currently each hold a 50% stake in MGM China.

Wall Street analysts have lauded 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 joint venture.

J.P. Morgan Chase & Co., Bank of America-Merrill Lynch and Morgan Stanley are the joint sponsors on the IPO, the term sheet said.

From Wall Street Journal, "MGM China's IPO Secures Four Cornerstones".

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