Investor urges MGM Resorts to sell 20% of Macau stake to Chinese firms in open letter 

Investment firm Snow Lake Capital published an open letter on January 6 to convince MGM Resorts International to sell off 20% of its MGM China stakes to a leading Chinese consumer or travel and leisure company – either of which would be regarded as a “strategic shareholder.”
In the letter to MGM’s board, the Asian investment management firm, which holds 7.5% of MGM China Holdings Ltd’s 2282.HK shares as its largest public shareholder, outlined the benefits of the proposed transaction across by spelling out “six main reasons”.
Sean Ma, Founder & Chief Investment Officer at Snow Lake Capital, expounded on one of the rationales that “the new strategic investor will bring significant non-gaming resources to both MGM China and Macau,” which he stressed would be conducive to a higher chance that MGM China would secure a new concession in 2022.
Macau’s six gaming concessions are going to expire in June 2022.
In 2020, Macau’s Chief Executive (CE) Ho Iat Seng confirmed the plan to axe the sub-concession model, and to commence revising the gaming law in the first quarter of 2021, a task slated to be completed by the fourth quarter of the year. A finalized draft bill will be submitted to the Legislative Assembly for the public re-tender process of the gaming concessions to move forward.
Regarding the “strategic shareholder” in this transaction, Ma identified several potential candidates, namely China’s leading shopping platform Meituan, online travel agency Trip.com, hotel management company Huazhu Group and Sunac China Holdings, a property developer which also runs tourism project Sunac China.
Given the extensive client base of these companies, Ma said having them as a strategic partner is “a key differentiating factor” for MGM in obtaining a new concession and will be a “win-win transaction” for both parties.
Meanwhile, he added that the potential partnership between a Chinese investor and MGM China’s Co-Chairman Pansy Ho – who has been a prominent figure in driving Macau’s diversification projects and shares close ties with China – could further deepen the city’s economic diversification and integration with the Greater Bay Area cities.
The transaction, once made, would unleash capital for MGM Resorts to secure an integrated resort opportunity in Osaka, Japan, which would catapult the group into position as the largest winner in Japan’s gaming industry.
The move will also provide increased financial flexibility for MGM Resorts to “pursue M&A in the secular growth market of online sports betting and gaming,” the letter writes.
MGM Resorts issued a reply to the letter on January 6, saying “MGM Resorts remains committed to Macau and will continue to take actions that are in the best interests of its shareholders and stakeholders.”
Currently, MGM Resorts has a 56% stake in MGM China. Snow Lake Capital, which increased its stakes in MGM China through two transactions in September and October last year, proposed MGM Resorts scale its stake down by 20%.
The spokesperson of MGM China told the Times yesterday that it could not make comments over the letter at the time as this is a matter concerning its mother company, MGM Resorts.
Earlier in December, the CE said for the first time “anything is possible” for a potential extension of the six concessions. Under the current gaming law, the CE has the right to prolong the concessions for up to five years.  Honey Tsang