Industry News
Melco IPO a Major Success
Wall Street investors went absolutely gaga at getting in on a company that is fully entrenched in the Macau casino business, investing more than $1.3 billion in the company. The company operates exclusively in Macau.
The IPO was a major homerun for Melco, which had originally priced its American Depository Shares at US $19 per share. In all the company was planning to sell 53 million of these shares, representing 159,000,000 ordinary shares. Each ADS represents three ordinary shares. However, demand proved so strong, the company sold 60.25 million American Depository Shares (180,750,000 ordinary shares) at $24 a piece, yielding the company US$1.365 billion. Melco began trading Tuesday, December 19, 2006 on the NASDAQ Global Market under the symbol "MPEL".
The underwriters have an option to purchase up to an additional 9,037,500 ADSs from Melco PBL Entertainment at the initial public offering price of US$19 per ADS less the underwriting commission to cover over-allotments of the ADSs. Credit Suisse, Citigroup and UBS Investment Bank acted as joint bookrunners for this offering, and CLSA Asia-Pacific Markets, JPMorgan, CIBC World Markets and Deutsche Bank acted as co-managers for the offering.
"This demonstrates international investors' appetite for Macau-related stocks," BOCI Securities analyst Ken Yeung said to Australia’s Courier Mail. "What the Sands and Wynn have done so far with their casinos has impressed them.
Melco PBL is a joint venture between Publishing and Broadcasting and Melco International Development controlled by Lawrence Ho, the eldest of Hong Kong billionaire Stanley Ho's 17 children. James Packer's Publishing and Broadcasting Ltd has invested about $380 million in the Melco joint venture, and has seen investment now climb to a value of more than $4 billion.
A portion of the funds earned from the IPO will used to pay back $640 million owed to casino mogul Steve Wynn who sold Melco a $1.15 billion gaming sub-concession.
Currently Ho operates a half dozen Mocha Clubs with just 1,000 slot machines. Next year he is looking to open the Crown Macau Hotel Casino to cater to serious gamblers in Macau and this new deal will help his company fund the City of Dreams, which will open on the Cotai strip in phases beginning in late 2008. A third casino plan is in the very early stages and could open in 2009. Additionally, the company has a conditional agreement to develop a hotel and casino on the shoreline of the Macau Peninsula for day-trip gamblers.
The Crown Macau casino will open in the second quarter of 2007 at a cost of $512.6 million and include 220 table games, which are preferred by gamblers in Macau over slot machines. The City of Dreams is expected to cost $2.1 billion and have 450 table games.
Though Macau is part of China it is a former Portuguese colony and therefore has less stringent regulations. It is the only region in the entire country where casino gaming is legal. The protectorate is rapidly expanding its gaming market and in October took in more money than the world famous Las Vegas Strip. According to a forecast by Globalysis, the destination is predicted to top more than $8 billion on 2007.
Casino mogul Stanley Ho once had a 40-year stranglehold on the market as Macau’s sole casino owner but has lost control of the market. In 2002, the region’s government sold additional gaming rights to companies such as Las Vegas Sands and Wynn Corporation. While the market is exploding as bigger and better casino resorts open, less people are visiting his venerable gaming establishments.
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