• Thu. Sep 23rd, 2021

MGM Acknowledges Anxious Activist Investor, However Imminent China Stake Discount Unlikely


Jan 7, 2021

Posted on: January 6, 2021, 08:31h. 
Final up to date on: January 6, 2021, 08:31h.

Todd Shriber Learn Extra

MGM Resorts Worldwide (NYSE:MGM) confirms it obtained a letter from Snow Lake Capital Ltd. founder Sean Ma, however the gaming firm isn’t dashing to trim its stake in MGM China Holdings (OTC:MCHVF) per the investor’s suggestion.

MGM’s Mirage on the Vegas Strip. The corporate isn’t dashing into promoting its China stake. (Picture: YouTube)

In a letter to the Aria operator’s board, Ma, whose agency controls 7.5 p.c of MGM China shares excellent, urged the Las Vegas-based gaming firm to contemplate promoting 20 p.c of the Macau enterprise to a Chinese language client web or journey and leisure agency, even going as far as to say 4 credible candidates.
Snow Lake, a Hong Kong-based cash supervisor owns 285.4 million widespread shares of MGM China and believes the US-based guardian can unlock worth for shareholders by trimming its stake and that onboarding a Chinese language associate would appease authorities forward of the 2022 Macau gaming license renewal course of.
For now, MGM is taking the overture underneath advisement, however seems unlikely to dramatically cut back its curiosity within the China operation over the near-term.

MGM Resorts stays dedicated to Macau and can proceed to take actions which are in the very best pursuits of its shareholders and stakeholders,” the corporate mentioned in an announcement. “We admire continued constructive engagement with MGM China shareholders.”

The Mirage operator owns 56 p.c of the Macau unit and regularly touts that stake as an asset that may be monetized ought to the guardian firm want money. Nevertheless, MGM’s stability sheet is stout is $5.9 billion value of liquidity.
Analyst Concurs: Don’t bet on Sale Quickly
Ma brings up some compelling factors, together with noting money raised from a 20 p.c sale of its MGM China shares may assist the corporate fund different large-scale tasks, together with an built-in resort in Osaka, Japan.
The Snow Lake founder additionally factors out that MGM may use the proceeds to forge forward with its tried acquisition of Entain Plc (OTC:GMVHY). Entain, MGM’s associate on the betMGM enterprise, turned again an $11.06 billion provide earlier this week and the suitor acknowledges as a lot, however MGM additionally famous it could reconfigure the provide to incorporate money from IAC/Interactive, its largest shareholder.

With out a burning want for the money a stake sale would herald and with Macau shares nonetheless feeling the results of the coronavirus pandemic, MGM most likely wouldn’t entertain Snow Lake’s concept “anyplace shut” to the place MGM China shares presently reside, based on JPMorgan analyst Joseph Greff.

Shares of the MGM Cotai operator would wish to just about double to reclaim the 2018 highs and whereas that’s not essentially a requirement to contemplate trimming its place within the Macau unit, it may very well be hasty of MGM to reduce its China publicity at this time.
Different Concepts
Greff, the JPMorgan analyst, says that for MGM to drag again from Macau personal “at these ranges is untimely, in our view, to drive incremental fairness worth.”
In fact, that doesn’t jibe with Snow Lake’s needs. The funding agency believes the introduction of a Chinese language web firm into the MGM China fray would profit shareholders.
Ought to MGM want extra capital, it will probably get that with out sacrificing Macau upside by additional decreasing its curiosity in MGM Development Properties (NYSE: MGP), its main landlord within the US. Final yr, the on line casino operator bought $1.4 billion value of the MGP items it held, however it nonetheless owns 53 p.c of the actual property firm.

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