The inability to play a role in gaming development in Macau has long been a hole in the portfolio of Harrah's Entertainment. And because American competitors like Las Vegas Sands, MGM Mirage and Wynn Resorts have done so well in the Chinese enclave, Harrah's lack of presence in that market has been especially irking for company chairman, Gary Loveman.

It appears, however, that a strategy is emerging that will fix that problem. Reports last week out of Macau suggest that Harrah's and Crown Entertainment are in discussions to buy Crown's interest in two casinos in Macau and the potential for more.

Crown, controlled by Australian gaming magnate James Packer, entered the market via a sub-concession partnership with Lawrence Ho and Melco Entertainment. Ho's role was part of the concession owned by his father, Stanley Ho, the major shareholder in SJM Holdings, who had a monopoly on gaming in Macau until the Chinese government opened up the industry following the handover from Portugal in 1999.

Crown has struggled financially in the past several years, due to messy investments in American gaming companies, particularly Station Casinos, the Fontainebleau in Las Vegas, and an adjacent property that would have been a Crown casino on the Strip. The company's interest in Macau has been one bright spot in its financials, with the Altira and City of Dreams performing nicely.

David Bain, a analyst with Sterne Agee, reported last week that Harrah's was ''acutely interested'' in buying Crown's 32 percent stake in Melco Crown Entertainment. Bain reported that attorneys in Macau were exploring the legal landscape that would come with such a transfer of equity, something that has not occurred in Macau since the opening of the gaming industry.

Since the only other option for entry into Macau is an expansion of the concession system-something that former Macau Chief Executive Edmund Ho said was off the table for at least 10 years-Harrah's has been forced to consider the equity purchase of Crown.

In addition to the $600 million that Crown paid Melco for the sub-concession, the joint venture has invested S3 billion in the City of Dreams casino resort, which targets the mass market, and S1 billion in Altira Macau, a property aimed directly at the city's VIP market.

Harrah's sole role in Macau at this point is ownership of the city's only golf course, which could become a casino site at some point should Harrah's receive a concession.

Packer has a close relationship with Harrah's executives and Crown actually owns a 2.5 percent stake in the company, which was written down to nothing recently by Crown.

In a conference call with investors early last week, Ho denied Bains' report.

"From our perspective it's total nonsense," Ho said. "Both James and myself and the management have really come this far, and we see a lot of potential growth, and the business is ramping up very, very nicely. It's really nonsense, all the rumors that we've heard."

Loveman believes that a Caesars Palace brand in Macau could become of the world's most successful casinos. A Harrah's spokeswoman refused to comment on the report.

Harrah's isn't the only major gaming company shut out of Macau. Malaysia's Genting Bhd, operators of Genting Highlands near Kuala Lumpur, and the recently opened Resorts World Sentosa in Singapore, has also eyed the SAR. Last year, Genting bought a piece of MGM Mirage in the hopes that the company might exit Macau in order to retain its gaming license in New Jersey, where regulators are questioning MGM's partnership with Pansy Ho. But with an IPO or MGM Mirage Asian operations underway, Genting is likely out of luck unless Macau would agree to issue more casino concessions.

"I think the possibility of more concessions is very low," Manuel Joaquim das Neves, director of Macau's Gaming Inspection and Coordination Bureau, told Reuters last week.

By Staff