* Permira exits Galaxy investment, nearly triples its money
in 5 yrs
* Shares sold at HK$27.17 each, at bottom of indicative
* Galaxy shares slip a day after reaching record high
By Elzio Barreto and Farah Master
HONG KONG, Nov 8 Private equity firm Permira has
raised about $875 million from the sale of its remaining stake
in casino operator Galaxy Entertainment Group Ltd,
capping a highly profitable investment that nearly tripled the
firm's money over the past five years.
Permira sold its final 5.94 percent stake in Galaxy on
Thursday, a day after the shares reached a record high and just
two weeks after the gaming company reported better-than-expected
The deal paid off in spades after the private equity firm
endured a roller-coaster ride in Macau's high-flying but
unpredictable casino sector. Permira's investment had lost more
than 90 percent of its value in late 2008 when the stock fell to
HK$0.50, sparking criticism for having taken a minority stake in
Galaxy without effective control of the company.
It also follows months of speculation over a possible
selldown and may lend support to Galaxy's shares, JPMorgan
analyst Kenneth Fong said.
"People were concerned about the placement, but now with the
overhang gone, it should boost sentiment," Fong said.
The stock traded down 3.9 percent in early afternoon trade
in Hong Kong, retreating from an all time-high of HK$28.05 the
day before. Hong Kong's benchmark Hang Seng index fell
The 249.6 million shares were sold at HK$27.17 each, putting
the total sale at HK$6.78 billion ($875 million), a source with
direct knowledge of the deal told Reuters. The shares had been
marketed in a range of HK$27.17 to HK$27.46 each, Thomson
Reuters publication IFR reported.
That takes Permira's gains to nearly three times its
original investment in Galaxy in 2007, profiting from the boom
in Macau's gaming industry in recent years and benefiting from
exchange rate gains as it invested from a euro-denominated fund.
Including two previous sales in August of this year and
September 2011, European-based Permira has raised a combined
HK$17.5 billion from selling off its 20 percent stake in the
casino company, which it originally acquired for HK$6.53
Founded in 1985, Permira advises funds with a total
committed capital of approximately 20 billion euros ($25.5
It has invested around $2.5 billion of capital, or nearly a
quarter of its global fund of 10 billion euros, in four
companies in Asia in the last five years: Galaxy Entertainment,
Japanese agrochemical company Arysta LifeScience, sushi
restaurant chain Akindo Sushiro and Asia Broadcast Satellite.
Other companies in its portfolio with a presence in
fast-growing Asia include German fashion house Hugo Boss
Galaxy, a $15 billion company by market capitalisation, has
expanded into one of Macau's three largest casino operators over
the past year.
Originally a construction and property company, it had no
experience in developing casino resorts when in 2002 it was
awarded the largest of several plots of land the Macau
government allotted under a plan to open up the former
Portuguese colony's casino market, now the world's largest.
But in the latter half of 2008, barely a year after Permira
had bought into the company, slumping financial markets and
strict visa controls by the Chinese government sent casino
Last year, the company opened its biggest casino project,
Galaxy Macau, on Macau's fast-growing Cotai strip, and it is
building a second phase set to open in 2015 that will put it
ahead of competitors including U.S. giant MGM Resorts'
Chinese arm, MGM China, and local rival SJM Holdings
, which is controlled by the family of Macau kingpin
Macau's casino sector has been a huge beneficiary of robust
Chinese growth in recent years, with revenue flows more than
five times those of Las Vegas, but a slowdown this year in the
world's second-largest economy has hit gambling revenues.
Demand from Chinese high-stakes gamblers has dropped,
pressured additionally by heightened political scrutiny as China
prepares for a generational leadership transition.
The Macau casino sector's revenue of $3.5 billion in October
was the strongest monthly figure so far this year, with steady
growth in business from China's expanding middle class
offsetting declines among the big spenders.
Analysts and investors in recent months have scaled back
their expectations for Macau's gambling revenue growth to about
10 percent, however, with a return to the heated 40 to 50
percent surges of the past year considered unlikely.
Galaxy said in a securities filing early on Thursday that
the sales were done through Permira's ENB Lux 1 S.àr.l and ENB
Lux 2 S.àr.l vehicles in a private placement, without disclosing
details of the pricing.
UBS acted as sole bookrunner on the Galaxy stake