SJM to purchase Oceanus for nearly MOP2b in convertible bonds
SJM Resorts Ltd. has entered into an agreement to purchase the Oceanus building for MOP1.91 billion, which the gaming operator has deemed “imperative, as it enables SJM Resorts to operate both gaming and non-gaming businesses within Oceanus.”
The price also represents the market value of the Oceanus non-gaming area at HKD516 million and the market value of the Oceanus gaming area at HKD1.390 billion, as determined by an independent professional valuer, according to the company’s filing in the Hong Kong Stock Exchange.
The HKD1.91 billion price tag shall be entirely satisfied by the issue of convertible bonds to the gaming operator’s parent company Tourism and Entertainment Company of Macau (STDM).
The gaming operator says that the decision to transfer the building to another owner is to “meet the property ownership requirement and to enable SJM Resorts to be eligible to tender for a new gaming concession contract for a further 10 years.”
The acquisition is also due to the “recent discussions between the Macau government and the gaming operator in relation to the government procedure for the extension of its Gaming Concession Contract to December 31, 2022, and to enable the group to fulfill the relevant requirements and allow the group to qualify for the application of the extension.”
SJM Resorts and the owner of Oceanus have agreed to provide a Letter of Commitment to the local government ahead of the concession expiry date, ensuring that the Oceanus gaming area can be reverted to the Macau Government at the end of the concession period on December 31.
STDM originally paid HKD688.7 million to acquire Oceanus in 1999.
Analysts are not pleased with the acquisition, with JP Morgan Securities (Asia Pacific) Ltd noting that the gaming operator is currently suffering from a liquidity strain “with very limited runaway.”
“We do not like the timing,” said analysts DS Kim, Amanda Cheng and Livy Lyu, as cited in a report issued by GRRAsia. According to the group, gaming operator does not need any other assets, given that it already owns 100% of the Grand Lisboa and Grand Lisboa Palace, as well as the Lisboa Hotel gaming floor.
