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Stanley Ho

Casino lures banner investors

PUBLISHED : Wednesday, 18 May, 2011, 12:00am
UPDATED : Wednesday, 18 May, 2011, 12:00am

Macau casino operator MGM China Holdings has lined up a billionaires' row of cornerstone investors for its Hong Kong public offering, which could raise as much as US$1.73 billion for Pansy Ho Chiu-king, who is selling part of her stake.

Four deep-pocketed investors, led by US hedge fund billionaire John Paulson, have combined to kick in US$190 million to MGM China's initial public offering, according to a draft prospectus circulated by the company yesterday at an investors' luncheon that was seen by the South China Morning Post.

The cornerstone investors - who include US billionaire Kirk Kerkorian and Hong Kong property tycoons Poon Jing of Asia Orient Holdings and Walter Kwok Ping-sheung of Sun Hung Kai Properties - will be guaranteed shares representing as much as 15.7 per cent of the initial public offering and 3.1 per cent of the company.

Paulson will invest US$75 million in the offering via his Paulson & Co. He is the second-largest shareholder of New York-listed MGM Resorts International, which, following the listing, will control MGM China with a 51 per cent stake.

Tracinda Corporation, the investment vehicle wholly owned by MGM Resorts' 93-year-old controlling shareholder Kerkorian, will invest US$50 million in MGM China.

Given their existing, combined 36 per cent stake in MGM Resorts, Paulson's and Kerkorian's decision to act as cornerstone investors in MGM China suggests they are keen to double down on Macau.

'They probably figure that among MGM's casinos globally, this is the one that will be the growth driver,' said one gaming analyst. Their investment 'suggests MGM China is a better buy than the US-listed company', he said.

MGM China is currently 50 per cent owned by MGM Resorts and Ho, daughter of Macau gaming magnate Stanley Ho Hung-sun, and operates the US$1.2 billion MGM Macau casino hotel.

The share offering will see MGM Resorts gain control of the Macau unit with a 51 per cent stake after Ho sells a 20 per cent stake to the public and, via a side deal, another 1 per cent to the US firm.

An over-allotment option could see Ho sell another 3 per cent stake to underwriters of the deal, lead by Bank of America Merrill Lynch, JP Morgan and Morgan Stanley - leaving her a 26 per cent stake in MGM China, if exercised.

Rounding out the list of MGM China's cornerstone investors are Asia Standard International, controlled by Asia Orient managing director Poon Jing, with a US$40 million commitment, and Sun Hung Kai non-executive director Walter Kwok's private Dornbirn Inc.

Companies seeking public offerings often line up banner names as so-called cornerstone investors in order to guarantee a certain level of investment and raise the profile of the deal among smaller institutions and retail investors.

MGM China's offering will see Ho raise US$1.209 billion to US$1.501 billion by selling 760 million shares, or a 20 per cent stake, at HK$12.36 to HK$15.34 per share, according to the term sheet. The over-allotment option for Ho to sell 114 million additional shares would raise another US$224.58 million if priced at the top of the range.

The indicated price range of the deal values the company at US$6 billion to US$7.5 billion, compared with a market value of US$7 billion for MGM Resorts.

MGM China kicked off its roadshow yesterday. The public offering runs from May 23 to 26 with pricing due to be announced on May 27. The shares are set to begin trading on June 3 under stock code 2282.

IPO

John Paulson
(via US hedge fund Paulson & Co)
US$75m

Kirk Kerkorian
(via Tracinda Corporatioion)
US$50m

Poon Jing
(via Asia Standard International)
US$40m

Walter Kwok Ping-sheung
(via his private Dornbirn Inc)
US$25m

Total US$190m which AT MOST will be equal to 3.1 per cent of the company's shares and 15.7 per cent of the IPO shares on offer