MGM Resorts International says it has no plans to sell down its controlling stake in MGM China Holdings, rejecting an activist investor’s call for a restructuring of the U.S. casino giant’s Macau subsidiary.
Snow Lake Capital, which styles itself an “Asian alternative investment management firm” and claims a portfolio of more than US$3 billion of assets, issued an open letter to MGM Resorts’ board of directors calling on the Las Vegas-based company to relinquish 20 percent of its MGM China shares to either a major Chinese consumer internet company or a travel and leisure company.
MGM currently owns 55.95 percent of the stock of Hong Kong-listed MGM China.
Hong Kong-based Snow Lake, MGM China’s largest public shareholder with 7.5 percent of the stock, casts its proposal as a new strategic direction it believes will better position both MGM China and MGM for future growth.
The firm’s founder and CEO Sean Ma elaborated on this in an interview with Chinese media outlet 36Kr in which he appeared to warn of more aggressive action if necessary.
“We Chinese people always try peaceful means before resorting to force,” he said.
MGM replied to Snow Lake’s letter on January 7, stating “that, as at the date of this announcement, the company has no plans of restructuring. The board will continue to communicate with the company’s shareholders and operate the company in the best interests of its shareholders and stakeholders, enhancing shareholder value and performance of the company.”
According to a report on the news site of Macau-based magazine Inside Asian Gaming, Ma’s letter outlined six reasons why MGM should sell and proposed several potential investors that could “create a win-win transaction for all parties involved and deliver significant shareholder value to both companies.”
Reportedly, he named four companies in his letter and said, “There are definitely more.”
“Any company that can help with Macau’s diversity, MGM China’s digital transformation and improve customer experience, will be a fit strategic investor,” he told 36Kr. “We have spoken to several of them, and they are very interested and willing to discuss further. As a long-term investor, I am firmly optimistic about the long-term development of Macau. In the long run, compared to Las Vegas, I think this market is far from saturated.”
He added that he has “absolutely no intention to kick MGM Resorts out,” saying instead that diversifying the share base “will open up a lot of room for its long-term growth over the next decade or two.”
He told 36Kr he attempted to discuss his ideas by phone with MGM Chief Executive William Hornbuckle, but “The other party’s attitude wasn’t positive.”
He said he also is open to a seat on MGM China’s board.
“I’ve known the president and COO, Hubert Wang, for almost 10 years,” said Ma. “He was born in Shanghai and has a good understanding of Chinese culture. And Pansy Ho, the core figure of MGM China, is a leader with lofty ideals. She is the key guide for MGM’s future development in Macau. If Ms. Ho believes I can bring value to the company by joining the board, then I am obliged.”