MGM Resorts hopes to raise $1.5 billion in IPO

It’s official.

MGM Resorts International, through the company’s joint venture partner in Macau, hopes to raise $1.5 billion in an initial public offering on the Hong Kong Stock Exchange, according to a term sheet for the sale.

Both Reuters and Bloomberg News Hong Kong reported Tuesday the offer in which Hong Kong businesswoman Pansy Ho will place 20 percent of her ownership in the MGM Grand Macau for sale to investors. The 760 million shares could be worth as much as $1.73 billion if underwriters exercise options to meet demand for the stock.

In similar IPOs on the Hong Kong Stock Exchange in 2009, Las Vegas Sands Corp. raised $2.4 billion and Wynn Resorts Ltd. raised $1.63 billion.

More than a year ago, it was thought MGM Resorts would raise between $300 million and $500 million through the IPO.

Jonathan Galaviz, chief economist for Galaviz & Co., said Asian capital markets would welcome the IPO because of the interest in gaming and the ongoing effort to increase tourism growth in Asia.

“Financial markets in Asia are somewhat volatile right now, so the timing of the IPO is a bit shaky,” Galaviz said. “But they should be able to pull it off.”

Ho, daughter of controversial Hong Kong billionaire Stanley Ho, will transfer a 1 percent stake in MGM Grand Macau to MGM Resorts, giving the casino operator a controlling 51 percent stake. She will also make a $300 million investment in MGM Resorts.

The 600-room MGM Grand Macau opened in 2007. The resort increased operating income by 158 percent in the 2011 first quarter.

Macau gaming revenues hit $23.5 billion in 2010, a 58 percent increase from a year ago, and more than four times the revenues produced by the Strip. Casino revenue in Macau grew 43 percent in the first four months of this year, according to data from Macau’s Gaming Inspection and Coordination Bureau.

Despite Macau surpassing Las Vegas as the world’s largest gaming revenue producing gaming market, analysts believe Las Vegas is still the center of the casino universe.

“It is strategically critical for Wynn, Las Vegas Sands, and MGM to continue to use Las Vegas as their global support headquarters for Asian market development,” Galaviz said. “Asian governments continue to see Las Vegas as the global center of innovation for tourism strategies, marketing, technology, and creativity.”

MGM Resorts’ move toward the IPO comes as Hong Kong-based Galaxy Entertainment opened a $1.9 billion resort in Macau on Sunday. The property has a combined 2,200 hotel rooms through three different brands with more than 50 food and beverage outlets.

Jefferies & Co. gaming analyst Ken Chen, who is based in Hong Kong, thought the property’s nongaming amenities would be a large draw to a growing customer base.

“We believe Galaxy has got it spot on with its world’s largest artificial wave pool and sandy beach resort on the podium rooftop,” Chen told investors in a research note. “It should be a primary destination for the burgeoning middle class and high rollers from mainland China.”

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871. Follow @howardstutz on Twitter.