Ho mulls spinning off gambling arm
Hong Kong listing may sidestep restive shareholders and raise nearly $8b as SJM squares up to tough competition
Stanley Ho and his associates may exit their 20 per cent stake in Sociedade de Jogos de Macau (SJM) - one of three gaming concessionaires in Macau - by offloading the gambling business into a listed vehicle to avoid continuing opposition from minority shareholders.
Sources said this was one option being floated by bankers to eliminate potential opposition from minority shareholders in Sociedade de Turismo e Diversoes de Macau (STDM) - such as Henry Fok Ying Tung and Mr Ho's sister Winnie Ho - which owns 80 per cent of SJM.
Sources said that while the idea of offloading the SJM stake, possibly into a listed vehicle such as Melco, owned by Stanley Ho's son Lawrence Ho, may not appeal to fund managers, who prefer more direct access in to the booming casino industry in Macau, it is workable.
Other options include a new listing for its offshore arm, STDM Investments, which is 99 per cent-held by STDM and controls 80 per cent of SJM.
While a listing may not take place until the second half of next year, Deutsche Bank has nevertheless been tipped to anchor any deal for SJM with a valuation of about $39 billion in total asset size.
A share sale would be likely to generate a total of between $5.85 billion and $7.8 billion, assuming that the 20 per cent stake in SJM were put on sale.
Deutsche Bank is among those banks that have managed a close relationship with SJM, sources have said, and potential candidates such as BNP, Morgan Stanley, and JP Morgan are also believed to be looking for vacancies.
'SJM has not fixed a timetable for a beauty parade, but we expect it is coming soon and we are going to take part in the bidding,' said one of the bankers.
SJM is the second concessionaire in Macau to declare its intention to list in Hong Kong.
Following Macau's approval for Galaxy Resort, the gaming franchise controlled by Lui Chee Wo, it is expected SJM will likely get similar blessing for its share sale.
Earlier this year, the gaming operations of Galaxy Resort were injected into Lui Chee Wo's listing vehicle, K. Wah Construction, at a consideration of $18.4 billion.
The franchise has been valued at $23.5 billion by an independent valuer.
SJM, which runs about 16 casinos in Macau, reported about $34.2 billion in gambling revenues last year, up 22.6 per cent from a year earlier. After-tax profits were $4.17 billion in 2004, up 20.7 per cent from a year earlier.
Nevertheless, SJM may face a stiffer competitive environment as other big players such as Wynn Resort, Galaxy Resort and Las Vegas Sands have invested heavily in second-phase projects in Macau.
Minority shareholder opposition has been a running sore in terms of Stanley Ho's Macau business ambitions, with Mr Fok and Winnie Ho from STDM openly declaring their dissatisfaction with Mr Ho's management style and dividend policy.
The Henry Fok Foundation declined to comment, saying it did not yet have enough details on a proposed SJM sale.
