For Genting, From Malaysia to Macau

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For Genting, From Malaysia to Macau–Via MGM?

Postby DM101 » Fri Jun 12, 2009 2:11 am

Genting’s recent move to take a 3.2% stake in MGM Mirage and buy a chunk of its debt is sparking talk that the Malaysian gambling concern is after a foothold in Macau, where MGM has a joint-venture casino and resort with gambling heiress Pansy Ho.

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Genting dominates in Malaysia and has a massive new resort ready to go in neighboring Singapore, but it doesn’t have a presence in the Chinese enclave of Macau–the most explosive growth story for the global gambling industry, even after a year hampered by a global recession and strict visa restrictions imposed on mainland Chinese visitors.

Macau watchers say any attempt by Genting to get into the lucrative market could be difficult, despite a tantalizing window of opportunity.

Last month, MGM said regulatory authorities in New Jersey had criticized MGM’s relationship with Ms. Ho, calling her “unsuitable.” Ms. Ho’s father, casino magnate Stanley Ho, for decades ran a gambling monopoly in Macau. Experts say any ruling by the New Jersey Casino Control Commission against the partnership could jeopardize MGM’s presence in either New Jersey, where it owns half of the Borgata in Atlantic City, or in Macau.

That in turn could leave an opening for an eager player like Genting, whose management said publicly last year that Macau holds attractive opportunities–despite the fact that all of Macau’s gambling concessions were handed out years ago.

Just after New Jersey’s report was made public, Genting bought $100 million of MGM debt, which sent Genting shares soaring on speculation about what the purchase could mean. Late Tuesday, MGM confirmed that it had sold a 3.2% equity stake to Genting. A spokeswoman for Genting Wednesday declined to confirm or comment on any equity stake sale, which was first reported in the Financial Times.

If a piece of Macau is what Genting is after, significant obstacles could stand in the way. First, New Jersey authorities may not find anything objectionable with MGM’s Macau partner, taking significant heat off of MGM. Second, experts say that even if confronted with a choice between giving up New Jersey or Macau, it is far from certain MGM would want to relinquish its beachhead in the promising Chinese market. And even if MGM should look to pull out of Macau, Ms. Ho would have the right of first refusal on any stake sale. There also is the sticky legal question–still untested–about if, how and under what conditions a Macanese gambling concession could be transferred.

That isn’t all: if Genting were to jump into a partnership with Ms. Ho, it would likely draw regulatory scrutiny from Singapore, where Genting’s commitment to its ResortsWorld project is more or less nonnegotiable. Singapore’s government, which has worked hard to cultivate an uncompromising reputation in dealing with “unsuitable” elements, could balk if Genting hitches itself to a business partner that has drawn the suspicions of New Jersey regulators. (In 2007, Genting was forced to drop out of a deal with Ms. Ho’s father after Singapore’s government objected.)

That all adds up to a daunting set of “what if’s,” but given how quickly things are moving in the gambling sector, it may be wise not to rule anything out. Investors seem to see opportunity in Genting’s moves to get a piece of MGM, pushing Genting’s Malaysia-listed stock up nearly 24% in the three weeks since Genting made public its purchase of MGM debt.

Of course, it is possible Genting has something else other than Macau on its mind. After all, MGM has attractive assets and a big presence in Nevada. It also has interests in other markets, including a proposed project in Vietnam.

Genting’s purchase also could be a smart move from an opportunistic perspective, should MGM weather the financial crisis, catching the Las Vegas icon at the bottom of the market. The $7-a-share offer MGM made last month comes at a sizeable discount to its historical trading range.

MGM was forced to sell the stake in a round of equity fund-raising last month, in part to help it finish its massive City Center project in Las Vegas.
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Re: For Genting, From Malaysia to Macau–Via MGM?

Postby Froggy » Fri Jun 12, 2009 10:41 am

this was what busted my bankroll :( revenge at the genting tournament!!!!
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