MGM Resorts International said it “acknowledges” a request Wednesday from an Asian investment firm that suggested the casino operator sell 20% of its Macau casino holdings to a Chinese company as a strategic investor but didn’t outright dismiss the idea.
In a statement brief statement, the company said it “remains committed to Macau and will continue to take actions that are in the best interests of its shareholders and stakeholders.”
Snow Lake Capital, a Hong Kong-based investment management firm with more than $3 billion in assets under management, sent a letter earlier Wednesday morning to MGM Resorts board of directors, suggesting it would be in the company’s “best interest to introduce a leading Chinese consumer internet or travel and leisure company as a 20% strategic shareholder in MGM China.
Snow Lake said it owns 7.5% of MGM China, which controls two Macau casino-resorts, MGM Macau and MGM Cotai. MGM Resorts owns 56% of MGM China and 29% is owned by Hong Kong businesswoman Pansy Ho.
In the letter, Snow Lake Founder and Chief Investment Officer Sean Ma said he had discussed the potential transaction with MGM Resorts CEO Bill Hornbuckle.
“We believe such a transaction will create a win-win transaction for all parties involved and deliver significant shareholder value to both companies,” Ma wrote. A potential buyer was not named.
In its statement, MGM Resorts said it “remains committed to Macau and will continue to take actions that are in the best interests of its shareholders and stakeholders. We appreciate continued constructive engagement with MGM China shareholders.”
Shares of MGM Resorts closed at $31.18 on the New York Stock Exchange Wednesday, up 82 cents or 2.70%.
Macau, which saw gaming revenues plunge 79.3% in 2020, ending the year with its lowest gaming revenue total since 2006, has been hurt by an economic fall out from the coronavirus pandemic. MGM Resorts saw its Macau revenues decline by 94% in the third quarter. Macau, however, accounts for roughly 20% of the company’s overall revenues.
In his letter, Ma labeled six key points to why he believes in the sale, including bringing “significant” non-gaming resources to both MGM China and Macau, which could help in the efforts to secure a new gaming concession. The current concession comes due in June 2022.
Ma said a potential partnership between MGM China Co-Chairman Pansy Ho and the new strategic investor would play “a significant role in Macau’s diversification and Greater Bay Area integration.”
Ma also suggested the funds from the transaction would give MGM Resorts enough capital to invest in a proposed integrated resort complex in Osaka, Japan.
JP Morgan gaming analyst Joe Greff told investors he had a “tough time” seeing MGM Resorts selling a portion of its Macau holding at current levels. The market, he said, has seen “two tough years” driving by COVID-19 and the challenged U.S.-China trade relations.
“While MGM has more (cashflow) exposure to US land-based and is focused on U.S. Sports Betting and iGaming, Macau still matters,” Greff said. Selling down at these levels is premature, in our view, to drive incremental equity value.”
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at email@example.com. Follow @howardstutz on Twitter.