MGM Resorts has signalled its ‘commitment’ to Macau following a request from its biggest shareholder to sell 20 per cent of MGM China’s shares, but has stated it has no intention of selling shares to meet demands to diversify.
MGM stated: “The board of directors of the company is aware of an open letter issued by Snow Lake Capital, an institutional investor and a shareholder of the company, to the board of directors of MGM Resorts International, the company’s controlling shareholder, on 6 January 2021, making recommendations on the shareholding structure and future development of the company,” it said. “The Board confirms that, as at the date of this announcement, the company has no plans of restructuring. The Board will continue to communicate with the company’s shareholders and operate the company in the best interests of its shareholders and stakeholders, enhancing shareholder value and performance of the company.”
Asian investment company Snow Lake Capital Limited wants MGM China to offload the stake to Chinese travel or internet platforms such as Meituan and Trip.com. It has also put forward hotel names such as Huazhu Group and tourism project operators such as Sunac China as potential strategic partners for MGM.
Snow Lake believes the ‘win-win’ investor for MGM would ease the operator’s concession renewal as well as providing funds for an integrated resort in Japan. It believes MGM China ‘needs to consider all options to maximise its chance of obtaining a new concession in 2022.’
Snow Lake Capital said: “We have been long-term investors in the Macau gaming industry. We think it is in MGM Resorts International’s best interest to introduce a leading Chinese consumer internet or travel and leisure company as a 20 per cent strategic shareholder in MGM China.”
“As discussed previously with MGM Resorts International Chief Executive Officer, William Hornbuckle, we believe such a transaction will create a win-win transaction for all parties involved and deliver significant shareholder value to both companies.”
“The proceeds from reducing MGM China stake will provide MGM Resorts International with much-needed cash to continue aggressively pursue the M&A, and reduce the potential dilution MGM Resorts International shareholders will face,” it added. “With a successful deal, MGM Resorts International can position itself well in a secular growth market.”
Snow Lake said MGM China is currently undervalued by 20% to 30% compared to other Macau operators largely due to concerns about the future of its gaming concession.
The first nine months of 2020 saw MGM generate revenue of HK$2.73bn, a slump of 83.9 per cent year-on-year.
Hubert Wang, President & Chief Operating Officer of MGM China said: “We will continue to invest in strengthening our market position, and continue to believe in the long-term success of Macau.”