Galaxy stock up after investor says it won't sell

PUBLISHED : Wednesday, 22 June, 2011, 12:00am
UPDATED : Wednesday, 22 June, 2011, 12:00am


Shares in Galaxy Entertainment rose 5 per cent yesterday despite lacklustre trading in Macau plays after the company said its biggest outside investor had no 'current intention' of selling down its HK$12 billion stake in the company.

The Macau casino operator said funds managed by British private equity firm Permira informed its board of directors that they 'are not engaged in any negotiation in relation to the disposal of shares in the company and neither do they have any current intention to dispose of their shares'.

The announcement came one week after a Bloomberg article cited two people with knowledge of the matter as saying Permira was considering unloading its Galaxy stake. Shares in Galaxy climbed 5.03 per cent yesterday to close at HK$15.03 following the firm's announcement.

Permira paid HK$8.42 per share, or HK$6.53 billion, for a 20 per cent stake in Galaxy at the height of a previous bull run on casino stocks in November 2007.

Within a year of that deal, Galaxy's shares had plunged to an intraday low of 53 HK cents apiece with the onset of the financial crisis, wiping a painful 94 per cent of the value off of Permira's investment at the trough of the market.

But Macau has since bounced back with a vengeance. Shares in Galaxy, which last month opened a HK$15.5 billion Cotai strip casino and hotel complex, have risen 70.7 per cent in the year to date amid a broad rally in the shares of Macau casino operators.

Gaming revenue in Macau rose 43.1 per cent in the first five months of the year to 103.33 billion patacas, setting new monthly records for the past three months in a row.

Permira's stake in Galaxy is now worth around HK$12 billion, meaning the British firm has nearly doubled its money and is sitting on a paper profit of HK$5.5 billion. Permira's purchase of the Galaxy stake was its first investment in Asia. It was acquired as part of its Permira IV fund, which raised US$15.1 billion in 2006.

The British fund has exited 27 investments since 1997, staying invested for around five years on average with its longest realised interest in a single firm lasting nine years, according to information on its website.


The paper profit, in Hong Kong dollars, that British private equity company Permira has made from its Galaxy investment