Macau Legend Development, a casino operator owned by former Macau lawmaker David Chow Kam-fai, aims to raise up to US$800 million in a Hong Kong initial public offering in the second quarter, according to people familiar with the situation.
Two sources with knowledge of the deal said the new shares were likely to be priced at a discount to market valuation because the company did not have its own gaming licence and ran casinos on several premises through a so-called service agreement with SJM Holdings.
"Under a service agreement, casino operators such as Macau Legend have to pay about 4 per cent of their revenue to gaming licence holder SJM," a person familiar with the deal said.
Rosita Lao, a spokeswoman for Macau Legend, refused to comment.
SJM, the pioneer casino operator in Macau founded by gambling mogul Stanley Ho Hung-sun, held the only casino licence in Macau until 2002, when the government opened up the industry for competition.
Of the six casino licence holders in the world's largest gaming destination, the Ho family controls three: SJM, Melco Crown and MGM China, a joint venture between his daughter Pansy Ho Chiu-king and MGM International. SJM also runs casinos in partnership with companies that do not have a licence to operate the business. It bought 4 per cent of Macau Legend for HK$480 million in August.
SJM has 26.5 per cent of the market in Macau, according to Lusa news agency of Portugal. It is the only gaming operator with more than 20 per cent of the market, but that is still down from the 29 per cent in 2011.
Chow, who was a legislator in Macau from 2005 to 2009, holds 33.6 per cent of Macau Legend while his mother, Lam Fong Ngo, is the second-biggest shareholder, with a 24.7 per cent stake. The company was formed by merging The Landmark Macau hotel, Pharaohs Palace Casino and theme park Macau Fisherman's Wharf. Macau Legend runs casinos on these premises.
Coming in the wake of a three-year dream run for Macau's gaming industry, the planned US$800 million shares offer is likely to take place as early as the second quarter after Macau Legend announces its 2012 results.
CLSA Asia-Pacific Markets is the sole book runner for the deal.
Macau casino revenue surged 19.6 per cent last month to a record 28.2 billion patacas, according to official data. Shares of Sands China rose 2 per cent yesterday to a record HK$36.45.
SJM went up 1.4 per cent, closing at HK$18.54, outpacing the benchmark Hang Seng Index that edged up 0.37 per cent.