Melco in Talks for $5 Billion Tokyo Casino

Melco Crown Entertainment says it will spend $5 billion or more to open a resort casino in Tokyo. The Macau casino giant (Crown Macau at left) envisions a joint venture that will open in time for the 2020 Olympics and is talking with several prospective Japanese partners.

Melco Crown Entertainment says it is in talks with several Japanese companies about getting a US billion joint-venture resort open in Tokyo in time for the 2020 Summer Olympics.

“I do not envisage an integrated resort in either Tokyo or Osaka would be successful at anything under $5 billion,” said Australian billionaire James Packer, co-chairman of the Macau casino giant. “The cost for the successful applicant would probably be more than $5 billion.”

Packer visited Tokyo last week as part of a delegation of Australian business leaders accompanying Prime Minister Tony Abbott on a swing through North Asia. The subject of a casino was part of those discussions, according to news reports.

Melco Crown will be flexible about any partnership and is talking to various companies, including real estate developers and infrastructure companies, co-Chairman Lawrence Ho has said. Melco would also be interested in tie-ups with Japanese trading houses, he said.

Pachinko giant Dynam Japan Holdings is one of the companies Melco has been talking to, according to Yoji Sato, Dynam’s chairman.

Sato said Dynam has also held talks with Macau’s SJM Holdings and Galaxy Entertainment Group, South Korea’s Paradise Entertainment and Cambodia’s NagaCorp.

“Dynam’s No. 1 focus is on the casino opportunity in Japan,” Sato said, adding that his company would not necessarily seek majority ownership but would want to play a leading role in operations. If it were able to secure a license, Dynam may look to raise funds in Japan, possibly through a listing or an issuance of shares, he said.

An A-list of global operators is eyeing a Japan market analysts believe will generate US$10 billion-$15 billion in gaming revenue out of the gate and could top $40 billion as it spreads from initial locations in Tokyo and Osaka into regional destinations in line with the Abe government’s desire to leverage tourism to reinvigorate the economy.

“Everybody has reached for another gear, whether it be the political bodies or prospective international companies that are interested in coming into Japan,’’ said Todd Nisbet, executive vice president of Strategy and Development for Packer’s Melbourne-base Crown Resorts. “There’s been this moment in time where the Olympics has crystallized thinking around what’s the best way to capitalize on Japan being on the world stage and really driving the next stage of growth.”

Melco Crown believes it’s a front-runner by virtue of its success in Macau, its gold-plated balance sheet and the high regard in which the region holds its management.

“We have an incredibly successful business both in Australia and abroad. We are financially sound. It is well within our means,” Nisbet said.

While the top global operators have for the most part focused on Tokyo and Osaka, Sato said he wants to target regional markets such as Hokkaido to the north and the southern Kyushu area in line with Dynam’s strategy for the pachinko market. It has placed most of its 370 halls outside large urban areas and has been trying to expand the number of players by offering a less expensive version of the game.

“I think the local area is better. There you can run a stable operation targeting the mass market, with high-rollers accounting for about 10 to 20 percent of your business,” Sato said.