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Foreign ownership rules to make or break Japan IRs

Wednesday, 16 May 2018 07:17
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The rules surrounding foreign ownership could prove the most important factor of all in establishing Japanese integrated resorts, with the prospect of multiple local partners potentially driving overseas operators away according to former Sands China and Melco Crown executive Alidad Tash.

Discussing the major issues Japan will face in the coming years during a panel at the G2E Asia Conference titled “Asian Markets Forum”, Tash – now SVP of Gaming and Strategy at 2NT8 – said that having to link with a consortia of Japanese companies could in fact be more trouble than it is worth.

“Yes there are 11 factors that have now been determined – there will be three cities, the next round will be seven years later, the tax rate is fixed – but I think the most unresolved question is the percentage of foreign ownership,” he said. “That is the biggest mystery I would struggle with.

“The percentage of foreign ownership is a big deal and that may play a part – if that ownership is less than 50% or less than 30% it will upset who we have traditionally viewed as the likely winners of those first three licenses because some of the people who operate IRs in Asia don’t play very well with other partners, let alone multiple partners.

“It would be easy if someone went to MGM and said, ‘You get 40% and this company gets 60%.’ I think that’s very doable. The difficulty will be if they say ‘You get 40% and these 15 companies over here collectively get 60%.’

“That consortia and having to deal with a bunch of different people who are not necessarily into gaming, entering into negotiations and everything that is associated with it, that’s going to be very challenging.”

Tash pointed to the example of Galaxy Entertainment Group and Las Vegas Sands, whose bitter divorce after originally coming together as 50-50 partners in Macau led to the city’s current sub-concession arrangement.

“I think the ownership issue in Japan could be another one of those big headaches,” he said.

However, Caesars Entertainment Group Managing Director and Representative Officer William Shen said that forming and working with such partnerships in Japan was inevitable.

“We’ve gone into market saying that we’re open to a lot of consortium structures, whether it’s minority, majority or controlling the stakes, and I think it’s necessary when Japan is looking for a Japanese IR, a uniquely Japanese IR … you can’t do that coming in as a western company without Japanese partners,” he explained.

“So I think that will be the key equation. Whether or not the available partners are there and interesting is another matter and that’s what we will find out more about in the next year or two.”

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