The long-delayed initial public offering for MGM Macau took another turn last month, one that was not anticipated. MGM Resorts announced that it would become majority owner of the company after the IPO was completed. To accomplish this, MGM partner Pansy Ho will place some of her equity up for sale, in addition to selling 1 percent to MGM to give the company a majority ownership of 51 percent.
MGM Resorts will pay Ho $45 million to purchase the 1 percent equity and assume $300 million in debt held by Ho. In the end, Ho will hold between 26 percent and 29 percent of the equity, while investors will own between 20 percent and 23 percent. If 1 percent equity is valued at $45 million, the IPO should raise around $1 billion, all of which goes to Pansy Ho.
Ho recently was part of the distribution arrangement reached with her elderly father, Stanley Ho, the founder of gaming in Macau. She immediately became one of the largest shareholders in SJM, and sources say she would like to control the company at some point. Since Macau regulations prevent any one person from owning two gaming companies, she would have to dispose of her remaining shares of MGM Macau in order to take over SJM. At this time, her stepmother, Stanley’s fourth wife, Angela Leong, is managing director of SJM, owning about 9 percent of the company as well. Leong’s contract with SJM runs for another six years.
Analysts cheered the move for MGM, allowing the company to control its own destiny in Macau, where it owns an additional 17 acres on the Cotai Strip for a second casino resort. But MGM got the weakest start of any of the companies that bought into Macau following the 2002 license competition, which MGM “won” by buying an SJM sub-concession through Pansy Ho. MGM has long trailed the pack in market share, being limited to one hotel. While it climbed out of the cellar for a few months late last year and early in 2011, it was back at the bottom in the latest revenue figures for March 2011.