April 16 (Bloomberg) — Las Vegas Sands Corp. Chief Executive Officer Sheldon Adelson and gambling tycoon Stanley Ho agreed to put aside their rivalry as part of a drive by Macau casino operators to battle dwindling revenue.
Adelson, 75 and Ho, 87, chairman of SJM Holdings Ltd., Macau’s largest casino operator, held talks with other casino operators in the city today. The two men also met for two hours for a “warm and friendly” lunch on April 14, said Ron Reese, a spokesman for Sands.
The billionaires agreed to cooperate as Macau’s casino boom loses steam, undermining earnings and driving down share prices. Ho, who lost his 40-year-old monopoly in Macau in 2002, and Adelson have criticized each other publicly as they competed for customers in the only Chinese city where casinos are legal.
“Everyone agreed not to compete, to have enough rice to eat and to get more taxes for the government,” Ho said after today’s conference. Another meeting will be held on May 18, said Ho, who declined to be more specific about the talks.
Las Vegas Sands, SJM and other casino operators may be considering agreements including “a complete freeze on salaries, to stop poaching from each other and uniform rates for junket operators” who bring high rollers to Macau, said John Koh, investment director of MEAG Hong Kong Ltd., which manages $1.1 billion. He spoke in a phone interview before the meeting.
Shares Drop
SJM fell 1 percent to HK$1.93 in Hong Kong trading today, while the benchmark Hang Seng Index retreated 0.6 percent. Today’s decline trimmed SJM’s gains this year to 14 percent, compared with an 8 percent rise for the benchmark.
Adelson, Sands‘ founder, is in Macau most of this week “for a variety of business discussions,” including today’s conference, Reese said by phone. The April 14 meeting with Stanley Ho took place at the Venetian Macao, he added, declining to provide details of the discussions.
The Sands Macao was the first foreign-owned casino to open in the city. Las Vegas-based Sands also built the Venetian Macao, Asia’s biggest gambling resort with replicas of St. Mark’s Square and the Rialto bridge.
Macau’s government has also granted permission to operate casinos to Wynn Resorts Ltd., Galaxy Entertainment Group Ltd., MGM Mirage and Melco Crown Entertainment Ltd.
Ho’s Children
Ho’s children Lawrence Ho, co-chairman of Melco Crown, and Pansy Ho, who has a joint venture with MGM Mirage, both attended today’s meeting, while Wynn was represented by a local official.
The casino operators formed the group to address issues including Chinese visa restrictions and their impact on tourism, Macau’s infrastructure and limits on commissions paid to junket operators who bring high-rolling players.
Adelson said last month he’s in talks with four groups of potential investors in the Sands‘ Macau developments, including two construction companies that have expressed interest in investing to finish building phases five and six of the company’s stalled $12 billion project. The development, which includes Shangri-La and St. Regis hotels, apartments, a casino and mall, was mothballed in November amid frozen credit markets.
The Macau project was suspended as Sands lost 94 percent of its market value last year. Casino revenue in Macau, where the company made 70 percent of its $4.4 billion in sales last year, has been hurt by the global recession and visa controls imposed by the Chinese government seeking to limit gambling by citizens. Citizens of mainland China need visas to visit Macau and neighboring Hong Kong, which are special administrative regions.
Sands‘ shares were unchanged yesterday at $5.15 and have dropped 13 percent this year.
Casino Revenue
While Macau’s casino gambling revenue grew 31 percent last year to 109 billion patacas ($14 billion), it fell quarter-on- quarter in the three months ended June, the first decline since at least 2005. Casino-gambling revenue continued to fall on the same basis in the third and fourth quarters last year.
Sands is talking with a group and an investor who have separately expressed interest in buying into its operating Macau casino resorts, Adelson said in March. The casino operator is also trying to sell two shopping malls within its Macau project.
William Weidner, Sands’ chief operating officer for 13 years, left the company last month after conflicts with Adelson. Weidner was also Sands’ president.
Las Vegas Sands raised $2.14 billion last year, partly from Adelson and his family, to raise cash and avoid bankruptcy.
The casino operator has at least $12.3 billion of bonds and loans maturing in the next six years, according to data compiled by Bloomberg. It had a loss of $164 million last year and had $3 billion in cash and near-cash assets.
In addition to halting its Macau development, the company has also suspended construction of projects in Las Vegas and Pennsylvania to conserve cash so it could finish a casino in Bethlehem, Pennsylvania, and a Singapore resort, the first of two being built in the Asian city-state.
To contact the reporter on this story: Chia-Peck Wong in Hong Kong atcpwong@bloomberg.net; Beth Jinks in New York at bjinks1@bloomberg.net
