China Star Entertainment Limited has announced that it has completed the sale of Macau’s Hotel Lan Kwai Fong to former Legislative Assembly member and head of the Golden Dragon Group Chan Meng Kam for HK$2 billion.
In a filing to the Hong Kong Stock Exchange, China Star said it was “pleased to announce that the completion took place on 3 January 2018,” adding that “the buyer has nominated a corporate entity, Golden Dragon Entertainment Holdings Limited to take up the sale shares and the shareholder loans at completion.
“The remaining balance of the sale price in the amount of HK$1,800 million has been fully paid in cash by the buyer’s nominee to the seller. The completion accounts and hence the amount of the actual working capital are pending finalization.”
The sale sees Chan acquire all sale shares and shareholder loans of China Star subsidiaries Charming Era, Exceptional Gain and Most Famous – owners of Hotel Lan Kwai Fong, Casino Lan Kwai Fong and 18 residential units in Macau being used as staff quarters. He also acquires Charm Faith, Classic Management, Best Joyful, Noble Million and Merit Noble, a group of companies held by China Star’s subsidiaries. Classic Management operates Casino Lan Kwai Fong via a service and site license agreement with license holder SJM.
In November, China Star cited government regulatory policies and expected “uphill challenges in the near future” as its primary reasons for selling Hotel Lan Kwai Fong – home to 84 gaming tables and 65 slot machines in the casino as well as 209 guest rooms, a flower shop, retail shop and spa center in the hotel.
At the time, China Star pointed to the recent poor performance of its gaming segment – which saw shared revenue fall 22% in 2016 and another 8% during the first six months of 2017 – stating, “There is no sign that the performance in such segment will have substantial improvement in the short term.”
The company also revealed its belief that Hotel Lan Kwai Fong is poorly positioned to capitalize on the Macau government’s push towards mass market tourism and greater diversification.
“Following new resort hotels being opened in Cotai in recent years, there is keen competition among hotels in Macau,” it said. “The Macau government wants to attract more families and mass market visitors interested in non-gaming entertainment as part of its program of economic diversification which favors those resort hotels in Cotai.
“Thus, our performance is diversified by these resort hotels. Since Hotel Lan Kwai Fong Macau is a casino oriented hotel and its hotel rooms are designed to serve and satisfy demands from casino patrons, the board believes that the performance in Hotel Lan Kwai Fong Macau will encounter uphill challenges in the near future.”
China Star Entertainment said it expects to record an estimated gain of disposal of HK$1.44 billion on the sale.
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