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Gaming Guru

Howard Stutz

Las Vegas Sands cancels $30 billion EuroVegas development in Spain

16 December 2013

LAS VEGAS -- Las Vegas Sands Corp. on Friday canceled plans for a $30 billion resort and gaming complex in Madrid, saying the EuroVegas development was no longer in the best interests of the company’s shareholders.

In a statement, Las Vegas Sands said it would focus on development opportunities in Asia. The company, which operates The Venetian and Palazzo resorts on the Strip, collects roughly 80 percent of its annual revenues and cash flows from its hotel-casinos in Macau and Singapore.

Las Vegas Sands Chairman Sheldon Adelson said the company’s internal development process dictated the outcome for Spain, which was to include 12 hotels with 36,000 hotel rooms, six casinos, a convention center, golf courses, theaters, shopping malls, bars and restaurants.

“That process has been extremely thorough, and while the government and many others have worked diligently on this effort, we do not see a path in which the criteria needed to move forward with this large-scale development can be reached,” Adelson said.

The Spanish government viewed the development as an economic development effort that could create more than 260,000 jobs. The project was to be carried out in phases over 10 to 12 years.

In recent months, however, EuroVegas had picked up opposition from various groups, including those not wanting to see the country’s anti-smoking laws reduced for the casinos.

“It was becoming more apparent that the Spanish government could not meet all the conditions that Las Vegas Sands had requested, and we would have viewed a decision to go forward without these conditions as a negative,” RBC Capital Markets gaming analyst John Kempf told investors.

Spain’s Deputy Prime Minister Soraya Saenz de Santamaria told the Associated Press that Las Vegas Sands made late demands for legal and financial guarantees that “did not comply with Spanish law or that of the European Union.”

She told the wire service the demands included tax benefits, financial compensation for any future law change that could affect the project and an assurance that new operators would be not be allowed in the sector.

Adelson said he envisioned developing integrated resorts in Europe for the past nine years, but the company’s efforts need to be trained on Asia.

“Right now our focus is on encouraging Asian countries, like Japan and Korea, to dramatically enhance their tourism offering through the development of integrated resorts there,” Adelson said.

Deutsche Bank gaming analyst Carlo Santarelli said the news shouldn’t come as a surprise to the company’s investors.

The project was first announced in September 2011, but not much progress was made during the past two years. Most of the focus had been on where to place EuroVegas, in either Madrid or Barcelona. Las Vegas Sands said in February it selected the Madrid suburb of Alcorcon for what would have been Europe’s largest gaming resort.

“While a formal announcement that the project is no longer under consideration may come as a modest surprise to some, we think the ultimate decision to shelf the development was expected by most as Spain had drifted to the periphery as Japan has come more into focus,” Santarelli wrote in a research note.

Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski said casino potential in Japan would be a far more lucrative investment for Las Vegas Sands, than any opportunity in Spain.

“Given the recent early-stage efforts to introduce formalized gaming legislation in Japan, we sense today’s announcement may have been driven by the greater sense of certainty around a potential Japanese opportunity and management’s interest in keeping powder dry in an effort to enhance its stature through what will likely be a fiercely competitive bidding process,” Wieczynski said.

Investors had little reaction to the news. Shares of Las Vegas Sands closed at $76.57 on Friday on the New York Stock Exchange, up 39 cents or 0.51 percent.