By Prudence Ho and Kate O’Keeffe
Of DOW JONES NEWSWIRES
HONG KONG (Dow Jones)–Nasdaq-listed Melco Crown Entertainment Ltd. (MPEL) plans to raise US$400 million-US$600 million through a Hong Kong initial public offering in the fourth quarter, a person familiar with the situation said Friday, in a move that would make it the latest Macau casino operator to look to Hong Kong to raise capital.
Melco Crown declined to comment, a day after it said it had applied to the Hong Kong Stock Exchange for a dual listing. Chief Executive Lawrence Ho, son of Macau gambling tycoon Stanley Ho, had said in a statement Thursday that the move would put the company on par with competitors who all have Hong Kong listings, improve liquidity for shareholders, give the company access to an additional source of capital and allow local investors to directly invest in Melco Crown. He didn’t provide a timeline for the listing, which would require regulatory and shareholder approval.
The plan follows Melco Crown’s June signing of a US$360 million deal to gain control over a large-scale casino-resort development project in Macau called Macau Studio City. The deal primes Melco Crown backers Ho and James Packer, the son of late Australian casino-and-media magnate Kerry Packer, to open their second casino project in Macau’s Cotai area, the focus of billions of dollars worth of investments from casino operators including Las Vegas Sands Corp. (LVS).
Citigroup analyst Anil Daswani wrote in a report dated Thursday that he expects proceeds from the potential offering to be put toward Studio City but that the bulk of capital expenditures of at least US$1.7 billion for the project will likely be debt-funded.
Sterne Agee analyst David Bain said the Hong Kong listing could provide a valuation hedge if the U.S. stock market experiences a worse decline than its Hong Kong counterpart. He noted the Hong Kong-listed units of Las Vegas Sands and Wynn Resorts Ltd. (WYNN) both trade at premiums compared with their U.S. capital market valuations.
A Melco Crown listing would follow the June initial public offering of MGM China Holdings Ltd. (2282.HK), a casino joint venture between MGM Resorts International (MGM) and Stanley Ho’s daughter Pansy that raised US$1.6 billion and priced at the top of the offering’s price range, reflecting investor optimism about Macau’s booming gambling industry.
Melco Crown, approximately one-third owned by Hong Kong-listed Melco International Development Ltd. (0200.HK), has hired Credit Suisse and Deutsche Bank to handle the IPO, people familiar with the situation said Friday.
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