In a move viewed as a good sign for Macau’s casino operators going forward, the government has extended the concession and sub-concession held by SJM and MGM until June 2022 to bring them in line with the other four license holders whose gaming rights are set to expire at that time
SJM’s concession along with the sub-concession it granted to a Macau subsidiary of MGM Resorts International in 2005, were due to expire in March 2020, and the extension was widely expected as the government contemplates a process, as yet unknown publicly, that will either affirm the position of the existing license holders come 2022 or result in an international tender or some combination of both.
Hong Kong-listed SJM owns 22 of Macau’s 41 casinos, most of them leased out to third-party operators. MGM owns two through MGM Grand Paradise, a subsidiary of MGM China Holdings, a Hong Kong-listed company majority held by MGM.
SJM Chairman Ambrose So said his company “welcomes this extension and the reasonable terms set by the Macau government,” adding that “synchronizing the expiration dates of all concessions and sub-concessions is very much in the interest of Macau and its tourism industry”.
“It’s positive because clearly the term of the concession is the principal asset of the company,” said MGM China CEO Grant Bowie. “It does give us the opportunity to look at alternate financing strategies moving forward, particularly preparing us for future capital investments.”
Union Gaming analyst Grant Govertsen told Reuters he believes the two extensions have more to do with making the ultimate rebidding process easier, “while at the same time making sure the labor market remains stable”.
When Macau was repatriated to China in 1999 after centuries of Portuguese rule, the territory was granted 50 years of autonomy under a new local government tasked with growing its moribund economy via international tourism.
At the time, Macau’s modest casino industry operated as a government-sponsored monopoly held since the 1960s by Hong Kong tycoon Stanley Ho. To further the tourism goal, it was decided to dismantle the monopoly and open the market to competition to attract deep-pocketed operators with big-time resort gaming credentials. More than 20 international operators bid for three 20-year concessions. In 2002, these were awarded to Galaxy Entertainment, a company spun off from a Hong Kong construction conglomerate, and its casino partner, Las Vegas Sands; to Wynn Resorts; and to Ho’s former monopoly, STDM, a Portuguese appellation rejiggered as SJM, a new company under new Portuguese initials with its concession backdated to the handover year of 1999.
When the Galaxy-Sands partnership quickly crumbled, the government created a sub-license for LVS in order to keep its massive planned investment in the territory. The other two concessions petitioned for the same treatment and also were granted a sub-concession each. SJM issued its sub-concession to Stanley Ho’s daughter Pansy Ho and her casino partner MGM. Wynn sold its sub-concession to Melco-Crown Entertainment, a Nasdaq-listed joint venture between Australian casino tycoon James Packer and Stanley Ho’s son Lawrence Ho. Packer has since divested his interest and the company has been renamed under Ho’s control as Melco Resorts & Entertainment.
