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Russia – Melco to own just five per cent of Primorye’s Oriental Regent
By Phil - 28 August 2013
Melco International Development has now confirmed its financial commitment to the Russian gaming zone to take shape in the far eastern Primorye Region close to Russia’s border with China. It has also confirmed it will own just five per cent of the project.
It said it would invest HK$514.1m in a 51 per cent stake in a casino resort in Russia with a total investment budget of HK$1bn.
The company’s confirmed that the casino was now under construction with a total planned investment of US$130m.
Summit Ascent will pay HK$463.7m for a 46 per cent stake in Oriental Regent, while Melco will pay 216.7m roubles for a five per cent interest.
The development will cover 90,455 sq. ft. with a gaming floor covering 31,630 sq. m. It will have 119 hotel rooms, 800 slots, 25 VIP gaming tables and 40 mass market gaming tables, and is expected to open in September next year.
Summit Ascent stated: “The casino resort has the advantage of being geographically close to the target feeder markets, the three Chinese provinces in northeastern China, namely Heilongjiang, Jilin and Liaoning. Russia offers a favourable tax environment for gaming business compared to other jurisdictions. The investment will give the company a first mover advantage as the proposed casino resort will most likely be the first legal casino to start operating in the Far Eastern Region of Russia.”
Melco International Development stated: “The company has entered into an investment agreement with Summit Ascent Holdings Limited, Firich Enterprises, Elegant City and Oriental Regent. Melco and Summit Ascent shall, on completion, subscribe for, and Oriental Regent shall issue, the new Oriental Regent shares. Firich will acquire 19 per cent of the enlarged issued share capital of Oriental Regent from Elegant City. Upon completion, Melco, Summit Ascent, Firich and Elegant City will be interested in five per cent, 46 per cent, 19 per cent and 30 per cent of Oriental Regent respectively.
Oriental Regent is an investment holding company which currently owns 50 per cent of First Gambling Company of the East LLC (FGCE). FGCE holds a gaming license awarded by the Administration of the Primorye Region to conduct gaming activities in the Integrated Entertainment Zone (IEZ) established in the Primorye Region. FGCE is also the tenant under the Lot 8 and Lot 9 Lease in respect of two land lots in the IEZ. Upon Completion, FGCE will become a wholly-owned subsidiary of Oriental Regent and will develop a casino resort complex on Lot 9; which is planned to have 119 hotel rooms, with 800 slot machines, 25 VIP gaming tables and 40 mass market gaming tables. The estimated total investment for the casino resort complex to be constructed on Lot 9 is US$130m (HK$1.008bn). The casino resort complex is expected to open in or around September 2014.
Firich is primarily engaged in the manufacture, installation and maintenance of electronic gaming machines, multi-player gaming terminals, video lottery terminals (VLT) and Lottery Point-of-Sales terminals (POS). Its products are widely deployed in Macau, Mainland China, Taiwan, Korea, the US and a number of European countries. Subject to the approvals of the relevant Russian authorities, it is expected that Firich will contribute to FGCE by providing electronic gaming machines specifically tailored for the Russian mass market as well as assisting FGCE to develop its clientele from Taiwan and Korea. Melco considers that the introduction of Firich as a new business partner to the venture will bring significant synergistic value to the consortium.
Melco said it would invest an amount equivalent to RUB83.093m (HK$19.3m) to Oriental Regent upon completion. In addition, Melco will invest an amount of US$900,000 (HK$7m), in cash, as equity in Oriental Regent after completion as subsequent funding.
