Investment in MGM by a Chinese online or travel group could be ‘tricky’ – Analysts

Gaming analysts consulted by Macau News Agency uncertain if the proposed acquisition of a 20 per cent stake in MGM China by a Chinese online or tourism group would be viable or even allowed by mainland authorities.

Last week Snow Lake Capital Limited, an Asian investment management firm published a letter it reportedly sent to the MGM Resorts International Board of Directors urging them to sell 20 per cent of local gaming concessionaire MGM China to a Chinese company as a strategic investor.

The investment group based in Hong Kong and Beijing holds approximately 7.5 per cent of the outstanding shares making it the largest public shareholder of MGM China.

“Would it be possible? It depends whether the sale can receive the approval from Nevada and Macau. I believe in Nevada, if the sale results in more than 10 per cent of the capital of MGM International, it would seek approval from the regulatory body,” the Director of Macao Polytechnic Institute, Centre for Gaming & Tourism Studies, Wang Chanbin, told MNA.

“If such a sale resulted in more than 5 per cent of the capital of MGM Macau holding by the new investor, it would seek the approval by the Gaming Inspection and Co-ordination Bureau (DICJ). If the sale does not reach the level above, it can go ahead by themselves.”

MNA inquired the DICJ if any request for authorisation for such as sale had been submitted, with no reply issued when this article was published.

Snow Lake also argued in its open letter that investment by a Chinese online consumer or travel & leisure company such as Meituan and Trip.com could assist MGM China in diversifying to non-gaming.

The group argued that Introducing one of China’s top consumer internet platforms as a significant strategic shareholder for MGM China would create a win-win transaction, as it distinguishes MGM China by bringing non-gaming capabilities and resources to Macau at the industry’s post-COVID-19 low.

Snow lake also considers that a strategic investor could provide both the company and Co-Chairman, Pansy Ho, the technology and resources required to achieve the long-term vision of Macau’s economic diversification and Greater Bay Area integration

On the other hand, these companies would allegedly benefit from the strategic investment, with Macau said to be well-positioned to possibly surpass Hong Kong and become the top destination for China’s outbound tourism, given the neighbouring SARs recent struggles with protests and the pandemic.

According to a gaming researcher, who chose to not include his name in the article, this suggestion only points out some upsides but could also be a “tricky” proposal. 

“In the first reason for selling 20 per cent of MGM China’s share to a Chinese company, [Snow Lake] stated that it ‘will significantly increase MGM China’s exposure to non-gaming’. I still may not be able to figure out finally, how would the ‘exposure’ to link up with a tourism and leisure firm in China really help MGM bring in more non-gaming business components to Macau, which is what the government really looking for,” the analyst indicated.

“Snow Lake may have more practical insights. However, I may question if the Chinese government may allow a mainland company to invest in Macau’s gaming business through its affiliated firms outside China.  For example, would the Chinese government approve a mainland-based company like Meituan to invest in Macau’s gaming business through its listed firm in Hong Kong? This was not allowed in 2002’s arrangement”

After the Snow Lake’s proposal, the MGM Resorts International Board of Directors issued its own statement, underlining that it ‘remains committed to Macau’ but that will continue to take actions that are in the best interests of its shareholders and stakeholders.