MGM to gain control of Macau casino in IPO

NEW YORK Wed Apr 13, 2011 4:23pm EDT

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NEW YORK (Reuters) - MGM Resorts International on Wednesday announced a plan for the initial public offering of its Macau casino joint venture in which the company would be the majority owner, sending its shares up more than 8 percent.

Under the agreement, Pansy Ho, the daughter of Macau gambling tycoon Stanley Ho, would receive a 29 percent stake in the company, MGM China Holdings Ltd, which has been created as a listing vehicle for the IPO. MGM Resorts would hold 51 percent and the public would receive 20 percent.

"The market likes it," said Telsey Advisory Group analyst Chris Jones. "Macau is very strong, and it will now be a more meaningful contributor to MGM's results."

The Ho family managed to complete the deal despite a highly public spat between father and daughter over the distribution of his assets.

The company plans for MGM China to be listed on the Hong Kong Stock Exchange.

Surging demand from the hordes of Chinese gamblers that flock to play in Macau -- the only place in China where gambling is legal -- has sustained double-digit growth in the world's largest gambling market.

With that success has come increased official scrutiny of Macau. About a year ago, MGM said it would yield its holdings in New Jersey in response to pressure from the state's Division of Gaming Enforcement.

The agency declared Pansy Ho an "unsuitable" associate due to its belief that her father has links to organized crime.

After MGM buys another 1 percent of the company's shares during the IPO, it will be able as the majority owner to include Macau's revenue in its quarterly figures, which it was unable to do when it shared the assets 50-50 with Ho.

Net proceeds from the offering will be remitted to an entity controlled by Ho. Through an intermediary entity, she will use a portion of the proceeds to invest in MGM Resorts convertible senior notes.

That investment is also a positive for MGM, Jefferies analyst David Katz wrote in a client note, because it will generate net proceeds of $311 million for the company by the completion of the IPO, expected by June 30.

An IPO would make MGM Macau the last of Macau's six gambling licensees to go public.

MGM could not comment further, citing Hong Kong Stock Exchange regulations governing IPO quiet periods.

MGM's shares closed up 8.6 percent, or $1.09, to $13.70 on the New York Stock Exchange trading.

(Reporting by Helen Chernikoff and Brad Dorfman; Editing by Maureen Bavdek, Bernard Orr)

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