MGM to Steer Macau Casino

MGM Resorts International said Wednesday it reached a new deal with Pansy Ho, daughter of Macau casino mogul Stanley Ho, that will eventually give it a controlling stake in their Macau casino venture. Under the deal, the Las Vegas-based casino operator will get 51% ownership of MGM China Holdings Ltd. after the venture’s initial public offering on the Hong Kong Stock Exchange this year. Ms. Ho will retain a 29% interest in the public company, with the remainder sold to the public and the proceeds going to entities controlled by Ms. Ho. The two partners had each held a 50% stake in MGM China.

Ms. Ho also will buy $300 million of debt-laden MGM Resort’s convertible senior notes on terms similar to its existing 4.25% convertible senior notes due 2015, it said. MGM will get $311 million in proceeds from Ms. Ho in the form of a loan. The deal is something of a surprise, as observers had expected MGM to gain directly from the proceeds of the IPO.

Yet the deal means that MGM will be able to hold on to and add more revenue and earnings from the venture going forward at a time when the Macau market is growing, even while Las Vegas, where MGM has its core business, remains stagnant. That should help MGM to have a healthier balance sheet. A date for the IPO hasn’t yet been set but is expected in May. The IPO could raise around $1 billion, another person familiar with the situation said earlier this month.

The new deal clears up uncertainty over the management structure of the Macau venture, which was a concern of analysts as it was unclear at times who was making decisions for the venture. On Wednesday analysts said the deal could spark more interest in the forthcoming IPO. A person familiar with the situation said Ms. Ho will retain her title of chairman and managing director in the venture but that her role will be diminished. “It’s unambiguous now,” the person said. “MGM controls the company.”

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