Investment firm Snow Lake Capital (HK) Ltd on Wednesday urged U.S.-based casino operator MGM Resorts International to sell 20 percent of the latter’s Macau casino unit to a strategic partner, namely a “leading Chinese consumer Internet or travel and leisure company”.
“We believe such a transaction will create a win–win transaction for all parties involved and deliver significant shareholder value to both companies,” the firm wrote in a letter to MGM Resorts’ board, signed by Sean Ma, Snow Lake Capital’s founder and chief investment officer.
Snow Lake Capital, which operates as an investment management firm, owns roughly 7.5 percent of MGM China Holdings Ltd. MGM Resorts has a 56-percent stake in MGM China.
In a Wednesday statement, MGM Resorts’ board said it “acknowledged” Snow Lake Capital’s letter related to MGM China. “MGM Resorts remains committed to Macau and will continue to take actions that are in the best interests of its shareholders and stakeholders,” said the casino operator, adding that it appreciates “continued constructive engagement” with MGM China’s shareholders.
In the letter, Snow Lake Capital said that a sale of a 20-percent stake in MGM China could “bring significant non-gaming resources” to both MGM China and Macau, “which is a crucial factor for the gaming concession retendering in 2022.” Macau’s current six gaming licences expire in June 2022.
Such a move could provide a “more certain outlook for securing a new gaming concession” in Macau, helping to “unlock value” for MGM China’s shareholders, added the investment firm.
Such a transaction could also give MGM Resorts financial flexibility to pursue deals in the online sports betting sector, and provide the company enough capital to commit to its Japan casino resort ambitions, stated Snow Lake Capital.
A consortium involving MGM Resorts and Japanese financial services group Orix Corp has been identified as the only qualified applicant for Osaka’s request-for-proposal (RFP) phase for a casino scheme.
MGM Resorts confirmed this week it had made a roughly US$11-billion tilt at acquiring online betting conglomerate Entain Plc. MGM Resorts already has a 50-50 joint venture with Entain, called BetMGM, for United States-based sports betting and iGaming.
Snow Lake Capital said that adding a leading Chinese consumer Internet or travel and leisure company as a significant shareholder and business partner could be “a key differentiating factor” for MGM China.
“Introducing a leading Chinese consumer Internet or travel and leisure company as a 20-percent strategic investor will significantly increase MGM China’s exposure to non-gaming and can be instrumental in diversifying Macau’s tourism economy,” wrote Mr Ma in the letter.
The investment firm identified four “suitable candidates” that could be a strategic partner to MGM China, “as their businesses are highly synergistic with Macau’s tourism industry as well as MGM China specifically.” They included: Meituan, which operates as a web-based shopping platform; Trip.com Group Ltd, a provider of online travel agency services; Huazhu Group Ltd, a Chinese hotel operator and franchisor; and Sunac China Holdings Ltd, a real estate developer and operator of cultural and tourism projects.
Snow Lake Capital suggested that any of the named companies would be “able to directly contribute to Macau’s tourism recovery through its industry-leading customer base and leisure demand traffic.”