US asset manager Waddell & Reed sold its stake in the Macau casino operator Sands China on Wednesday, raising $1.4 billion in an accelerated block trade on the Hong Kong stock exchange.
Some 192.6 million shares were priced at HK$55.45 ($7.15) per unit, a 4.8% discount to their May 27 close of HK$58.25 and towards the lower end of its initial HK$55.27 to HK$55.90 price range.
Bank of America Merrill Lynch acted as sole bookrunner on the deal as Waddell & Reed reshuffled its global portfolio by simultaneously purchasing 16.9 million shares in Las Vegas Sands, Sands China’s parent company.
Portfolio managers at Waddell & Reed said the superior liquidity offered by Las Vegas Sands' shares was the main reason for the reshuffle and that they remained confident about the ability of the casino operator to make money in China. Las Vegas Sands owns 70.2% of Sands China and is now one of Waddell & Reed’s largest holdings, the Kansas mutual fund house said. Waddell & Reed had previously owned roughly 2% before Wednesday's block.
A source familiar with the matter said the deal was covered multiple times, without specifying, after four-and-a-half hours of bookbuilding. More than 90 institutions bought the shares, a mix of gaming specialists, long-only institutional investors and hedge funds in the US and Asia.
Although shares in Sands China have lost about 9% so far this year, they have appreciated by 461% since listing at HK$10.38 in November 2009. Waddell & Reed has been invested in the company since its $2.5 billion initial public offering.
Sectoral trend
Macau gaming stocks in general have registered solid returns since their IPOs but have been volatile of late as slower revenue growth, reports of clampdowns on Chinese visitors and missing junket operators fuel investor concerns. Analysts say a rebound may not be in the cards until next year, once the new resorts are opened.
Shares in hotel and casino operator Macau Legend Development are up 148% from the time of its flotation in July 2013 but are down 26% so far this year. MGM China, which is up 82% since raising $1.6 billion in 2011, is down 20% so far this year, while Wynn Macau, which has soared 243% since raising $1.9 billion in 2009, is down 6% year-to-date.
Any bet on Macau – China’s answer to Las Vegas – is a bet on the mainland Chinese consumer story. And the numbers show that long-term, investing in the former Portuguese colony’s casino operators has generally paid off.
But the April disappearance of Macau junket figure Huang Shan, believed to owe up to $1.3 billion, is clearly having an effect on the world’s largest casino market.
Unlike other gambling cities, Macau – which has estimated revenues seven times higher than Las Vegas – depends on junkets for many of its customers, as these companies bring in high-spending gamblers from the mainland, issue credit and collect players’ debts in exchange for commissions.
Analysts say the impact of this junket disappearance remains unclear, noting that it could be a one-time incident or trigger a chain reaction.
