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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Gambling beyond Nevada: Company expanding in Macau

14 February 2007

LAS VEGAS, Nevada -- MGM Mirage, which is still awaiting regulatory approval of its Chinese business partner, announced Tuesday it was proceeding with plans for a second casino in Macau under its joint venture agreement.

The Las Vegas-based casino operator said discussions with Macau government officials had reached a stage in which the company could submit plans for a second hotel-casino later this year. The cost and details are still to be determined.

In a statement, MGM Mirage said the resort would be located on a yet-to-be decided site on the Cotai Strip, where rival casino operator Las Vegas Sands Corp. is planning to open the $2.4 billion Venetian Macau later this year. Las Vegas Sands is spending $11 billion to develop seven different hotel-casino sites on Cotai that are expected to open through 2010. Wynn Resorts Ltd., which operates the recently opened Wynn Macau, is also formulating plans to build additional Cotai Strip casinos.

The proposed MGM Mirage casino would be built in partnership with Chinese businesswoman Pansy Ho, who holds a subconcession that was granted by the Macau government to develop and operate hotel-casinos in the gaming enclave.

MGM Mirage and Ho, the daughter of controversial Chinese billionaire Stanley Ho, are equal partners in the $1.1 billion MGM Grand Macau, which is under construction and expected to open by year's end. The resort will have 600 hotel rooms and a casino with 345 table games and 1,035 slot machines.

Nevada gaming regulators have tentatively set Feb. 27 for a public hearing in Las Vegas to determine Pansy Ho's suitability. The regulators want to be assured that her business interests are separate from those of her 84-year-old father, who owns several gambling halls in Macau and has fought allegations that his casinos have been involved with organized crime triads.

MGM Mirage Chairman Terry Lanni has said in previous interviews that he has no doubts about Pansy Ho's independence from her father.

Gaming Control Board Chairman Dennis Neilander said MGM Mirage has held its position all along that Pansy Ho has separate business concerns from her father.

"The process is evolving in Macau so I'm sure there are some timing issues in this type of matter," Neilander said.

Deutsche Bank gaming analyst Bill Lerner said the announcement may express MGM Mirage's confidence that Pansy Ho will be found suitable by Nevada gaming authorities.

"I would suspect this isn't the last development that MGM Mirage will be involved with in Macau," Lerner said. "I would suspect other MGM Mirage brands will be used in the market, maybe on Cotai or even on the peninsula."

Bear Stearns gaming analyst Joe Greff said that booming Macau market, which reported gaming revenues of more than $6.95 billion in 2006, made it obvious that MGM Mirage would want multiple casinos in the gaming jurisdiction.

"We think this announcement will not come as a surprise to investors, as second and third Macau projects between MGM Mirage and Pansy Ho have long been discussed by current operators in the Macau market," Greff said in a note to investors. He predicted that MGM Mirage would spend upward of $1.5 billion on the proposed resort.

Lerner added that MGM Mirage's announcement was an endorsement of development on the Cotai Strip, an area of land being reclaimed by Chinese engineers from the South China Sea in between the islands of Coloane and Taipa. Las Vegas Sands currently has plans to develop 147 acres on Cotai.

"We're not really sure where the site is because the land is being reclaimed," Lerner said.

Shares of MGM Mirage closed Tuesday up 84 cents 1.21 percent in trading on the New York Stock Exchange to finish at $70.24. The company is scheduled to announce its fourth-quarter earnings this morning.

Pansy Ho is the oldest of Stanley Ho's 17 children and has been reported to be the heir apparent to her father's business holdings. She is expected to attend the hearing in front of Nevada gaming regulators. The control board would make a recommendation on her suitability, which the Nevada Gaming Commission would then take up at a later date.

In 2005, published reports said New Jersey gaming regulators had begun looking at MGM Mirage's relationship with Pansy Ho. MGM Mirage co-owns the Borgata in Atlantic City with Boyd Gaming Corp. and has about 70 acres of undeveloped land near the casino.

Harry Curtis, an analyst at JP Morgan Securities, wrote in a research note Tuesday that MGM Mirage may be willing to sacrifice its 50 percent interest in the Borgata to preserve its Macau joint venture if New Jersey regulators reject approving a license for Pansy Ho, Curtis said. Boyd Gaming Corp. owns the other half.

Control Board sources said a year ago the agency was planning to ask MGM Mirage to file an application of suitability for the proposed Macau joint venture, but the company took the action itself to ward off being forced to comply with any formal request.

Because she is not operating a Las Vegas casino, Pansy Ho does not need a Nevada gaming license. However, under state gaming regulations, she can be considered for suitability.

Pansy Ho's subconcession is under the concession granted to her father, who owns the competing Macau casino and has been a controversial figure in Chinese business circles. Stanley Ho's business holdings include hotels, real estate, a ferry route, Macau's largest department store, an airline and a racetrack.

Bloomberg News contributed to this report.

Gambling beyond Nevada: Company expanding in Macau is republished from Online.CasinoCity.com.