Macau is witnessing changes on a daily basis but some of them have a more significant impact than most people might think. The recent exit of former Chief Executive Officer Steve Wynn from his own company Wynn Resorts caused a rapid wave of reactions and consequent moves of other gambling operators in the field. In the aftermath of the situation many casino operators willing to or currently developing in Macau were involved and some of them managed to achieve great benefits which could shape the future of the gambling industry in the largest gambling hub in the world.
Towards the middle of March, it became clear that Steve Wynn will receive the permission to sell his shares in the casino operator and this is going to open a possibility to potential new players to enter the field in Macau. Many analysts were quick to make speculations regarding the casino developers or companies which could purchase some of the shares up for grabs. the question which concerns everyone in the casino industry is who is going to purchase the said considerable share of the company.
Some experts in the field made a prognosis that casino operator Genting Bhd. might be eyeing the opportunity to finally enter the gambling field in Macau with the help of this purchase. Back in 2002, the company could not bag one of the casino licenses on offer and a later partnership with casino tycoon Stanley Ho led to nowhere. Chairman Lim Kok Thay is willing to explore opportunities for entering the field and Wynn’s shares sell might be just what Genting needs. However, the reality turned out to be quite different.
The international gambling industry witnessed the final decision of casino tycoon Steve Wynn to sell 4.1 million of his shares in the company he founded in 2002 and this led to the market rival Galaxy Entertainment Group purchasing 5.3 million primary shares in Wynn Resorts amid the turmoil. The price at which the casino developer purchased them amounts to $175 per share, which after the tally resulted in $927.5 million of gross proceeds to Wynn Resorts. The shares amount to some five percent of the overall shares which makes Galaxy Entertainment one of the substantial shareholders in the company.
What the Future Holds
Shortly after that analysts began speculating about potential future moves regarding the gambling industry in Macau which could be impacted by this purchase. As Galaxy is a rival casino operator to Wynn Macau, the shares acquired in Wynn Resorts are going to make it easier for it to acquire the entire casino operator in the future. This is would then result in a considerable presence in the gambling field of Macau, as the two developers would possibly merge their operations in the gambling hub. The investment has the potential to shape the future of Macau in a different way, but for the time being there have more details regarding the future plans of Galaxy have not been publicly disclosed.
As it was confirmed, the shares purchased recently make Galaxy a passive investor in Wynn meaning that the company would not take one of the appointed seats in the Wynn Resort board. This means that Galaxy will rely on the controlling stakeholders and the management to conduct the business of the corporation in such a way as both to maximize its value and to share the upside potential with the passive investor.
This status is probably justified by the regulation which says that neither a Macau gaming concessionaire nor any Macau gaming concessionaire’s shareholder with a stake of 5 percent or more in that business, has the right to control a stake of 5 percent or more in any other local gaming concessionaire. However, it was also confirmed that the purchase is considered legal by the authority.
Even though the investor might be a passive one in Wynn Resorts, this purchase has the prospects to better the position of the company when t comes to the future of Macau and the future gambling licenses renewal which is expected to take place in 2020 and 2022. Francis Lui Yiu Tung is the Deputy Chairman of Galaxy Entertainment, and he stated that Wynn Macau now has better prospects for license renewal.
The future is uncertain and Macau’s government has not revealed anything particular regarding the license renewals, but the introduction of a new investor which has a reputation of a reliable brand in the international gambling sphere is something which could boost the reliability of Wynn Macau.
Outcome of Galaxy’s Purchase
In the meantime, the Hong Kong-based Galaxy is investing in one of the largest US-based gambling operators and this could potentially be the sought opportunity for linking the two markets. At the moment the gambling industry in the US amounts to some $33 billion. On the other hand, the government might not entirely agree with the plans for a close-knit partnership with US-based gambling developers, passive as it was speculated by some experts in the field.
According to prognosis, Beijing might be working on ways in which foreign investments and interest could be reduced when it comes to Macau. This is potentially the reason why Galaxy was in the right place at the right time when former Chief Executive Officer of Wynn Resorts Steve Wynn announced he is going to sell his entire stake in the company. Ben Lee is a Macau-based managing partner at Asian gaming consultancy IgamiX and as he recently claimed, nobody expected such turn of events when the controversy revolving around Mr. Wynn was unearthed and companies made a good use of the situation.
With its move to purchase the said amount of shares in Wynn Resorts. Galaxy is reserving its spot in a field which heavily relies on high rollers and their VIP investments in the gambling industry. This purchase is guaranteed to provide Galaxy with the exposure to the VIP gaming sector in Macau which has the potential to boost the performance and the revenue of the casino developer. The following months are going to witness the development of event and how both parties are going to benefit from the new partnership they have established.
In Conclusion
One of the highly discussed topics for the last month has been Mr. Wynn’s decision to sell his entire stake in Wynn Resorts and the changes this brought with itself. The shares purchase which Galaxy performed opens the door to many possibilities for future development and collaboration between the two casino operators. For the time being Galaxy is a passive investor in Wynn Resorts, but as it has been confirmed by experts in the field, its presence as a shareholder has the potential to change the future of Macau.
