MGM Resorts Reaffirms Macau Commitment in Response to Snow Lake Capital Letter

  • Snow Lake Capital urged MGM to sell 20% of MGM China’s shares to a non-gaming company
  • MGM Resorts said it “remains committed to Macau,” but expressed its appreciation for the advice
  • The letter gave six reasons for the sale, including the approaching 2022 concession re-tendering
  • Officials will revise Macau’s gaming law this year before operator licenses expire in June 2022
MGM Cotai in Macau
In response to a letter from Snow Lake Capital, MGM China’s largest public shareholder, MGM Resorts has reaffirmed its dedication to its Macau-based business. [Image: Shutterstock.com]

MGM gives a firm response

MGM Resorts International has released a statement in response to a letter from MGM China’s largest public shareholder, Snow Lake Capital.

The Asian investment firm wrote to MGM Resorts on Wednesday, urging the casino operator to sell 20% of its MGM China shares to a non-gaming Chinese company. Snow Lake Capital argued that investment by a consumer internet or travel and leisure company would “create a win-win transaction for all parties involved.”

MGM Resorts remains committed to Macau”

In response, MGM Resorts reaffirmed its dedication to the Macau-based branch of its business. A statement on the operator’s website read: “MGM Resorts remains committed to Macau and will continue to take actions that are in the best interests of its shareholders and stakeholders.” Despite this, the operator expressed its appreciation for continued “constructive engagement” with MGM China’s shareholders.

Further details of the letter

In contrast to MGM Resorts’ 56% stake in the business, Snow Lake Capital holds just 8% of MGM China’s outstanding shares. In its letter, however, the investment firm suggested six aspects through which a sale would benefit all shareholders.

The letter primarily argued that a new investor would provide a useful non-gaming partner for MGM China. It said this would be vital in the impending concession re-tendering process in 2022. The firm believes MGM China could utilize its relationship with the new shareholder to align with the China State Council’s development plans for the region. It argued this would, in turn, improve MGM China’s chances of obtaining a new concession.

In 2019, the Chinese State Council published the “Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area.” This established the government’s plans to develop Macau into a hub for travel and leisure. Additionally, CEO of the Macau Special Administrative Region Ho Lat Seng has said he aims to promote economic diversification. Both are factors in Snow Lake Capital’s argument.

Among other reasons included in the letter, Snow Lake Capital said diversification of the business would increase value for shareholders. The firm also argued that proceeds from the sale could increase financial flexibility. This would allow MGM to commit to plans for Japanese expansion and to pursue M&A opportunities in online betting markets.

What will the 2022 re-tendering entail?

Six land-based casino companies currently operate in Macau through government-granted concessions. They include MGM China, Galaxy Entertainment Group, SJM Holdings, Wynn Macau, Las Vegas Sands, and Melco Crown.

all six Macau concessions now expire in June 2022

SJM and MGM China paid $24.8m each for license extensions in 2019. As a result, all six Macau concessions now expire in June 2022. Ahead of their expiration, the Macau government plans to complete a gaming law revision in 2021. It is unclear what this revision will entail, but officials aim to finish it by Q4 2021. The Legislative Assembly will then assess a finalized draft bill.

There is no clear indication as to what approach the Macau government will take with the license renewals, though Ho Lat Seng has suggested there will be some changes. In April last year, the chief executive announced that sub-concessions will not be included in the next round of casino licensing. MGM China, Las Vegas Sands, and Melco Crown all currently operate through these sub-concessions. Authorities granted them after the initial period of licensing in 2002.