China Economy

Private equity house Permira sells Galaxy stake at shares' peak

Private equity house sells stake in Macau casino operator at shares' peak, before they fell again

PUBLISHED : Friday, 09 November, 2012, 12:00am
UPDATED : Monday, 30 May, 2016, 5:00pm


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Private-equity firm Permira hit the jackpot by unloading its remaining stakes in Galaxy Entertainment on Wednesday as the stock surged to a record high, and right before it fell off again.

Permira's timing was impeccable as shares in Galaxy, one of the big three casino operators in Macau, dropped up to 5 per cent yesterday after hitting a peak, its largest drop in three months, before closing down 4.37 per cent at HK$27.35. On Wednesday it closed at HK$28.60.

Permira decided to sell 249.6 million shares in Galaxy on Wednesday, representing nearly 6 per cent of the casino operator's issued shares. The sale is expected to be completed on November 12, according to a Galaxy filing with the Hong Kong Stock Exchange. It didn't say how much the shares were sold for.

According to a Reuters report, the shares were sold at HK$27.17 apiece. That would mean the private-equity firm could pocket HK$6.78 billion, a neat 170 per cent gain on its investment in Galaxy in 2007.

Macau's casino sector has profited from the rising middle-class and affluent mainland visitors in recent years. Casino revenues have jumped more than five times that of Las Vegas primarily because of mainland tourists. But the slowdown of the mainland economy has cast doubt on the gaming industry. Casino stocks went into a tailspin after disappointing revenues in September.

An unexpected jump in gambling revenue last month, however, pumped life back into the industry. Helped by an eight-day holiday last month, gaming revenue rose 3.2 per cent year on year to 27.7 billion patacas, Macau's strongest monthly figure ever. The record revenue also pushed up the prices of shares in Galaxy and other casino operators.

Galaxy emerged as one of the three big operators in Macau after its casino and resort complex opened in the Cotai Strip last year. When the second phase of its complex is completed in 2015, as scheduled, it will surpass its competitors - MGM Resorts' Chinese arm, MGM China, and SJM Holdings, which is controlled by the Stanley Ho family.

More competition is looming for Galaxy, however. Last month, the Macau government approved land concession contracts for MGM China and SJM, allowing them to expand to the Cotai Strip, currently dominated by Sands China and Galaxy.