Hong Kong Investor Calls on MGM Resorts to Sell 20 Percent of MGM China

MGM Resorts International could sell 20% of its casino holdings in Macau to a leading Chinese firm. The idea of finding another shareholder was pitched by Snow Lake Capital, an investment management company which owns 7.5% of MGM China.

The Hong Kong-based firm wrote a letter to MGM Resorts’ board of directors this week, suggesting such a transaction would be in the best interest of the company.

MGM Resorts “acknowledged” the idea and said it will continue to honor its commitment to its Macau operations and will make decisions that will benefit its shareholders and stakeholders. According to Sean Ma, Snow Lake founder and Chief Investment Officer, the request had already been discussed with Bill Hornbuckle, the current CEO of MGM Resorts.

Snow Lake’s letter to MGM Resorts did not disclose the name of the potential shareholder, but it highlighted that the transaction would benefit all parties involved. The potential investor would also come from China’s travel and leisure industries. Responding to the letter, MGM Resorts said it appreciates consistent constructive engagement with MGM China shareholders.

MGM China Must Diversify

MGM China operates two casino resorts in Macau, namely MGM Macau and MGM Cotai. MGM Resorts is a majority shareholder of MGM China, owning 56% of the company’s shares. Hong Kong businesswoman Pansy Ho owns 29%.

After the request was made public, MGM Resorts saw its shares close at $31.18 on the New York Stock Exchange, which represented an increase of 2.70%.

Macau’s gaming industry has been severely impacted by the coronavirus pandemic, with revenue down 79.3% at the end of 2020. It’s the lowest it has been since 2006. As a result, MGM Resorts’ Macau operations also suffered a 94% decline in revenue in the wake of the global health crisis.

One of the primary reasons behind Snow Lake’s sell plea is the fact that the sub-concession model will no longer be part of Macau’s new gaming regime, as earlier stated by Ho Iat Seng, Macau’s current Chief Executive.

At present, MGM operates in Macau via a sub-concession contract with Sociedade de Jogos de Macao (SJM). The current gaming concessions in Macau will expire in June 2022. According to Snow Lake, there is a need for MGM China to get a new concession which can be achieved through diversification.

Snow Lake said the strategic deal would pave the way for MGM to secure much-needed funds that would enable the company to purse potential mergers involving the online gaming and sports betting industries. Proceeds from the transaction will also provide enough capital for MGM Resorts to be invested in a proposed integrated resort complex located in Osaka, Japan.