MANILA, Philippines (2nd UPDATE) – Casino billionaires James Packer and Lawrence Ho are now on board with the group of the Philippines’ richest man Henry Sy for a US$1-billion gaming venture in Manila.
On Thursday, July 5, Belle Corp, a unit of the Sy’s SM Investments Corp. signed a memorandum of agreement (MOA) with Melco Crown Entertainment for the development of a casino and entertainment resort within the 120-hectare Entertainment City of state-run Pagcor that will rise on a reclaimed area along Manila Bay and near the Manila airport.
“Belle has agreed to join MCE (Melco) under a new consortium to create a premier integrated resort complex,” SM Investments Corp announced in a statement, referring to the Belle Grande Manila Bay project.
Ho, son of casino mogul Stanley Ho, and Australian billionaire Packer, co-own Melco, which already has a network of casinos in Australia and Macau, the world’s gambling mecca.
This deal will not only ratchet up the competitiveness of the gambling industry in Manila, where the government is hoping to create the Philippines’ version of the Las Vegas Strip. It will also bring in an additional investment from Melco of “no more than $580 million over the course of the project.”
Though Belle owns the casino license, it lacks gambling experience given the Sys’ business focus on mall, real estate development, and leisure and travel. Belle has been seeking a partner to outsource services, especially the casino management.
Belle, which will remain as lessor of the land from the government, will turn over to Melco the task of continuing the constructing, fitting out and operating Belle Grande Manila Bay in Entertainment City.
Fitting out the project has been put on hold for the past 6 months as deal negotiations dragged on. It remains to be seen if Melco can meet the previous aim of holding a grand launch of the casino in the first quarter of 2013.
The MOA was signed between Melco and the SM units, Belle and its affiliate PremiumLeisure and Amusement Inc.
Under the MOA, the parties will “negotiate in good faith and sign upon the satisfaction of various conditions within 60 days a consortium agreement, which will include the agreed form of certain implementing agreements for the leasing, development, operation and management” of the project, Melco said in a disclosure to the Nasdaq stock market.
Melco said the consortium agreement is conditional upon the project’s registration with the Philippine Economic Zone Authority as a tourism economic zone, which will be subject to tax incentives and other perks.
“The MOA is legally binding. On signing of the consortium agreement, the MOA shall terminate and be superseded,” the company’s disclosure read.
Melco said these investments will be funded by a combination of cash and debt.
In the casino business, providing different gaming destinations for the high-roller clients is the name of the game.
Casino investors have been setting up a network of casinos in different locations — often in different countries — to offer their prized clients something and some place new.
Belle was initially considering partnering with US-based Harrah’s Entertainment, the world’s largest casino operator. However, talks failed in 2010, prompting Belle to tap instead local public company Leisure & Resorts World Corp (LRWC), which operates bingo and interactive games licensing at the Cagayan Economic Zone Authority.
LRWC will now assume an equity capital position in the new venture and receive economic benefits in return.
Other Pagcor licensees
For its Philippine venture, James Packer of Australia is set to encounter a familiar casino player — Genting Ltd.
Genting Bhd of Malaysia is the busines partner of one of the 4 groups granted the casino license at the Pagcor Entertaiment City by the state agency.
Philippine tycoon Andrew Tan’s Alliance Global Group has a joint venture with Genting, which also has network of casinos in key cities in Asia.
Genting and Packer’s Australian gaming firm Crown Ltd have crossed paths in recent past. The two have been wanting to up their stakes in Echo Entertainment Group, which operates a casino in Sydney and other hospitality assets in Australia.
Genting has successfully increased its stake to 10% of Echo despite similar efforts by Packer, a billionaire who recently sold his inherited media empire to controversial Rupert Murdoch.
Genting’s moves in Australia do not bode well for Packer’s previous plan of combining forces with Echo and building an upscale new casino in Sydney that would appeal to Asian gamblers.
In Manila, meanwhile, the Sy-Packer-Ho agreement is up against 3 other groups also awarded licenses to build and operate casino-tourism complexes in the Pagcor gaming hub.
The biggest player so far is Japan’s Universal Entertainment Corp led by controversial pachinco billionaire Kazuo Okada.
Okada’s group said they will invest $2 billion in a casino-hotel project set for completion by 2014.
Okada and his partner-turned-foe, Steve Wynn, have several Wynn Resorts casino complexes in Macau and in Las Vegas that are currently in dispute.
The last is Bloomberry Investments, which is led by fast-rising billionaire and global port operator Enrique Razon Jr. It is set to open a $1.2 billion casino-resort in the same area early next year. The company has contracted Global Gaming Asset Management.
Gaming to boost PH growth
The Philippine government wants to accelerate construction of the casinos, which it expects will trump those in Las Vegas and Singapore in the next 4 years.
Pagcor chairman Cristino Naguiat earlier said that revenues from Entertainment City are expected to hit $10 billion by 2016, when all 4 locators start full operations.
Boosting the casino industry will also help the country meet its goal of increasing tourists, who will spend not only for gaming, but other leisure and entertainment activities.
Naguiat said Pagcor’s project can accommodate an additional one million tourists, one-tenth of the government’s target of 10 million by 2016. – Rappler.com
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