Investment firm Snow Lake Capital on Wednesday urged MGM Resorts International to sell 20% of its China business to a strategic partner, calling it a ‘win-win transaction’ for all.
The firm, which owns roughly 7.5% of MGM China Holdings Ltd’s 2282.HK shares, wrote in a letter to MGM’s board that such a move would give MGM Resorts financial flexibility, provide the company enough capital to commit to its Osaka, Japan gaming integrated resort project, and bring non-gaming resources to both MGM China and Macau.
“Introducing a leading Chinese consumer internet or travel & leisure company as a 20% strategic investor will significantly increase MGM China’s exposure to non-gaming and can be instrumental in diversifying Macau’s tourism economy,” Sean Ma, Snow Lake’s founder and chief investment officer, wrote in the letter, which was seen by Reuters.
MGM Resorts said it remains committed to Macau and appreciates “continued constructive engagement” with MGM China’s shareholders.
Adding a partner would help with the gaming concession re-tendering in 2022, the letter said, calling it a “key differentiating factor” for MGM.
Snow Lake identified four potential partners – Meituan, Trip.com Group, Huazhu Group Ltd and Sunac China Holdings.
At the same time, any company ready to partner with MGM would also benefit from a strategic investment in MGM China at a time when Macau could, “Possibly surpass Hong Kong and become the top destination for China’s outbound tourism, given Hong Kong’s recent struggles with protests and the pandemic,” the letter said.
Such a step would also allow MGM to sweeten its offer for Entain Plc, an online focused operator that owns bookmaker Ladbrokes. Snow Lake added its voice to a growing chorus of shareholders backing the potential tie-up with Entain, writing that ‘an acquisition of Entain Plc makes tremendous sense for MGM Resorts International as the U.S. online market represents a key long-term growth opportunity’.
