HONG KONG -- Macau casino operator Galaxy Entertainment Group will join forces with its associate in Monaco, Societe des Bains de Mer, to pursue casino resort development opportunities in Japan and other new Asia-Pacific markets.
Japan's sudden move in December to legalize casino gambling has elicited renewed affirmations of interest from U.S. and Asian gambling bosses. Some have talked of investing up to $10 billion to open a casino resort in the country. Lawrence Ho, chairman and chief executive of Melco International Development, has called the opportunity "priceless" and said he would "spend whatever it takes to win."
For Galaxy, according to President Michael Mecca, the passage of the bill made it "a suitable time to share details of our partnership" with Societe des Bains de Mer. In 2015, Galaxy paid 42.4 million euros ($46.1 million) for a 5% stake in Euronext-listed SBM, a 154-year-old company which owns the stately Casino de Monte Carlo and three other gambling palaces in Monaco.
Prime Minister Shinzo Abe and other Japanese officials have signaled an interest in following the example of Singapore's "integrated resorts" whose operators are required to invest heavily in non-gambling attractions to accompany their gaming offerings.
Mecca, in an interview with Nikkei Asian Review ahead of the company's announcement of its development partnership with SBM on Wednesday, called Casino de Monte Carlo the "original integrated resort." For the first three quarters of its current financial year, SBM generated just 40.1% of its revenue from gambling, with casino operations overshadowed by the company's four luxury hotels, including the venerable Hotel de Paris.
Ruler Prince Albert II, who controls SBM through the government's majority stake in the company, "was very involved" in choosing Galaxy as a partner, said Mecca, who now sits on the SBM board.
By contrast with SBM, Galaxy generated 89.6% of its revenue last year from gambling though its Macau properties include numerous luxury hotel towers, a theater, an artificial beach and other entertainment offerings.
Mecca noted that Galaxy now has set up an office in Tokyo. "We have been building relationships with government officials, prefectural governments, city governments and major corporations," he said. "We have been taking the time to understand how to do business in Japan." Chairman Lui Che-woo had told reporters in Hong Kong in late February that the company was looking to enlist local Japanese partners. Galaxy's flagship resort in Macau includes a hotel managed by Japan's Okura Hotels and Resorts.
Hong Kong-listed Galaxy's six casinos in Macau already generate more annual revenue than the entire Las Vegas Strip. Galaxy is the world's second biggest casino company by market value with a capitalization of 182.35 billion Hong Kong dollars ($23.48 billion). Its shares have risen more than 25% this year and 50% in the past 12 months - more than double the rise in Hong Kong's benchmark Hang Seng Index. SBM's shares are roughly even with where they were at the time of Galaxy's investment.
The partnership of Galaxy and SBM seems set to compete for favor in Japan with one between Melco and Australia's Crown Resorts. A joint venture between the two, which was said to cover Japan when it was set up in 2004, already operates casinos in Macau and Manila though Crown in December reduced its stake in the venture.