SJM has revealed it will purchase the Oceanus property from majority controlling shareholder STDM for some HK$1.9 billion (US$242 million) in convertible bonds as part of its gaming concession extension agreement with Macau authorities.
The HK$1.9 billion value represents the sum of the market value of the Oceanus non-gaming Area of HK$516 million and the market value of the Oceanus casino of HK$1.3 billion, as determined by an independent professional valuer.
The original acquisition cost of Oceanus paid by STDM amounted to
HK$688.7 million in 1999.
SJM noted that after recent discussions with Macau Government to extend its concession contract to December 31, 2021, as a lessee of Oceanus and together with its owner Jai-Alai Shopping Centre Company Limited, agreed to provide a letter of commitment to the Macau Government ahead of the Concession Expiry Date ensuring that the Oceanus Gaming Area be reverted to public control at the end of the concession period.
Under the current gaming law concessionaires, are obliged to automatically revert to the Macau Government, free of charge and free of any encumbrances or burdens, its casinos and related equipment without compensation at the end of the concession period.
All six gaming concessions and sub-concessions are set to expire on June 26, with authorities already revealing plans to extend them by six months to December 31.
‘In view of the above, the Group entered into the Transfer Agreement to meet the Property Ownership Requirement and to enable SJM Resorts to be eligible to tender for a new gaming concession contract for a further 10 years,’ the company said in a Hong Kong Stock exchange dispatch.
‘Lastly, the Company considers the Transfer to be imperative as it enables SJM Resorts to operate both gaming and non-gaming businesses within Oceanus in a synergised manner which are complementary to one another’
SJM also noted that during the period pre-Covid era Casino Oceanus generated substantial free cash flow and was one of its best-performing casinos between 2017 to 2019.
Oceanus is a 4-story building comprising approximately 39,242 square meters of which approximately 34.6 per cent includes its casino and with the remaining area represented by non-gaming.
Oceanus has been leased by the Jai-Alai Shopping Centre Company to SJM Resorts and the total rents paid by SJM Resorts were approximately HK$80.6 million and approximately HK$43.0 million for the years ended 31 December 2021 and 2020 respectively
The convertible bonds will be sold by Jai-Alai Shopping Centre Company Limited the owner of Oceanus – issued by Champion Power Global Limited and purchased by Harbour Tide Limited with an initial conversion price of HK$4.07 per share.
While Jai-Alai Shopping Centre Company Limited is a Macau incorporated company in Macau, Champion Power Global Limited and Harbour Tide Limited are wholly-owned
subsidiaries of SJM Holdings incorporated in the British Virgin Islands
Some 468,304,668 Conversion Shares will be issued representing approximately
and 8.2 per cent stake in SJM Resorts.
STDM currently holds a 54.7 majority stake in SJM Resorts, which would be increased to 58.1 per cent if the company was to fully exercise its bond conversion rights.
‘The issue of the Convertible Bonds allows the Group to preserve its cash resources in the challenging business environment in Macau due to travel restrictions amid the continuing COVID-19 pandemic and provides protection to the Independent Shareholders from immediate shareholding dilution,’ the company added.
Currently, some 12 per cent of SJM Resorts is held by its Executive Directors, which include among others Daisy Ho Chiu Fung, Timothy Fok, Angela Leong On Kei, and Ambrose So Shu Fai.
The Transfer is still subject to the satisfaction of certain conditions, including the approval of the transfer by the independent shareholders at a general assembly scheduled for June 22.
