Macau casino operators fear the end of winning streak with new gaming law

Bill Hornbuckle, CEO Casino Group MGM ResortsLast week, he was convinced that China’s crackdown on technology, education and online games would fall short of Macau, the world’s largest gambling center.

“There are no direct signals of concern at that level,” he told an investor event in Las Vegas. Even if the 20-year casino license was due to expire next year, he confidently predicted that the MGM would be extended and exuded a guarantee. “We believe [our licence] Extended: Time to tell. ”

But just a day later, Chinese territorial authorities had the biggest impact on the sector since the outbreak of the pandemic. It’s a drastic proposal to strengthen surveillance that could take control of the lucrative industry from foreign shareholders.

news Wipe out $ 20 billion from value An index that tracks the industry of listed gambling companies, including Sands China, MGM China and Wynn Macau, recorded the worst day on record.

Industry executives and analysts were blinded by the scope of the proposed limits and were able to force major changes in their business, including appointing government supervisors and implementing official policies from within. .. Gambling license renewals are also not guaranteed.

China’s President Xi Jinping has launched a wide range of campaigns in recent months. Reshaping the economy The focus is on “common prosperity,” including redistribution of wealth, crackdown on vices, and improved rights for workers and consumers.

“”[The law is] Part of the national policy to crack down on gambling activities, Macau is part of China, “said Pedro Cortés, a partner of Macau law firms Rato, Ling, Lei & Cortés, which specialize in gaming law. “It will be a fresh era.”

According to industry statistics, Macau offers casinos generous tax incentives, with 2019 game revenue of 292.4 billion MOP ($ 36.6 billion), compared to Las Vegas Strip Casino’s $ 6.6 billion.

However, the Chinese government has long been dissatisfied with US shareholders making money from their territory and believed that economic interests should remain domestic.

“There is a general perception [that US-listed casinos] Don’t leave enough money here, “said a former Macau government official. “China wanted Macau to find a way to keep money from popping out of Macau.”

The casino operator met with Macau government officials on Monday. This is the only meeting scheduled during the 45-day legal consultation period.

The meeting was suddenly summoned and is a descendant of the late casino tycoon Stanley Ho, including his daughters Pansy and Daisy. Taken over his holdingAnd his son, Lawrence, who is responsible for Melco Resorts in Macau, was unable to rush back to Chinese territory in time.

US-listed Las Vegas Sands founded by the deceased Sheldon Adelson, MGM and Win operate nine resorts in Macau and their local subsidiaries are listed in Hong Kong. Local Operator Galaxy Entertainment, Stanley Ho SJM Holdings and Melco, which are dual-listed in the United States and Hong Kong, are also making concessions.

All six game groups made stunning returns in Macau with the 2012 Xi Anti-Corruption Drive Coronavirus crisis.. Industry revenues began to rise this year after revenues plummeted 79% to $ 7.53 billion in 2020.

A vertical bar chart of annual revenue ($ 1 billion) showing that Macau's gambling revenue is higher than Las Vegas

Las Vegas Sands highlights the importance of territory to gaming companies Selling Nevada Real Estate In March, growth relied on Macau and Singapore. “Asia continues to be the backbone of the company,” said Rob Goldstein, chairman and chief executive officer of Las Vegas Sands at the time.

Sands China, MGM China and Wynn Macau did not respond to requests for comment.

The bill talks seek public opinion as to whether the number of casino licenses known as “concessions” or “sub-concessions” needs to be renewed. He also proposed giving the government a say as to whether businesses would pay shareholder dividends.

A senior Macau casino executive told the Financial Times that Beijing believes US-listed casinos are “reallocating” profits to their parent company. They added that the government would not completely block dividends in the future. .. .. That’s another story. “

“The majority of us thought it was a lot harder than we expected, especially dividends,” said the second senior executive at the casino in Macau. “All that is spent in Macau is Chinese money. In essence, many have returned to US shareholders. Therefore, because they know China, they want to keep more money in Macau. I would think.”

Executives added that US casinos may have to change their structure if the law is passed as proposed. “American companies can be shareholders, [they will become] More Chinese companies. “

Many Macau casino operators work with local partners. For example, MGM Resorts has a joint venture with Pansy Ho. This year, Chinese investment management firm Snowlake Capital has asked MGM to sell 20% of its Chinese operations to local “strategic investors.” Localize those operations.

The proposed law will also force casinos to increase the proportion of equity capital held by permanent residents of Macau. This move is in line with the local government’s focus on maximizing the economic value of the largest industries, such as through employment guarantees.

Under local regulations, the local Macau general manager already holds a 10% stake, which could be another type of non-voting stake. In other words, you can hold it by name alone.

Another important part of Macau’s gaming industry that is being scrutinized further is the promotion known as the VIP “Junket”. This is a sub-sector that has attracted credit to High Roller, expanded credit and has long been anxious in Beijing.

The new law “ends VIP games and limits capital movements,” said a former Macau official. Casino operators were shy at the talks on Monday, but junket representatives were more critical of the bill, which criminalized common industry practices.

However, many casino operators have new properties in their pipeline. A $ 2 billion redevelopment of the Cotai Central Property with a Westminster-like façade and a full-scale replica of Big Ben, the London casino and resort in Sands is in the process of opening.

Recently, Macau has pressured casinos to pursue non-gaming investments.

Melco has invested In a non-gambling resort in Zhongshan, a cross-border city in Guangdong, the Galaxy has a plot in nearby Hengqin.

Alidad Tash, a former casino executive at game consultancy 2nt8 Limited, said the law could mean that the Macau casino sect would become more independent of US parents in the future.

“as if [the Chinese government is] It’s uncomfortable that three of the big six are American. They have to be much more Chinese. “

He added that the operator was “don’t worry, crazy.”

Macau casino operators fear the end of winning streak with new gaming law

Source link Macau casino operators fear the end of winning streak with new gaming law

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