Buyout giant Permia cashes in on Macau casino
HONG KONG — Europe’s leading buyout firm Permira Advisers will buy 20% of Macau casino operator Galaxy Entertainment Group for HK$6,5bn ($838m) in its first Asia investment.
Permira Funds will purchase $775m Galaxy shares at HK$8,42 a share, according to a press briefing in Hong Kong yesterday.
Galaxy, one of the city’s casino license holders, will use the transaction to reduce debt and develop a Macau resort.
Foreign casino operators including Las Vegas Sands and Wynn Resorts are staking more than $20bn on Macau after the city’s government ended the 40-year monopoly of gambling magnate Stanley Ho.
The stake sale will help Galaxy cut debt 29% and raise cash to complete its Cotai Mega Resort.
“There are significant benefits to be gained from combining expertise,” the two companies said yesterday.
Permira Funds has made 40% of its investments in the leisure, retail and consumer industries in the past decade, including a stake in Gala Coral, the UK’s biggest operator of bingo halls.
Macau, the only Chinese city where casino are legal, surpassed Las Vegas last year as the world’s biggest gaming hub. Casino revenue in the city surged 50% in the second quarter.
Permira, known as Schroder Ventures Europe before 2001, will buy existing Galaxy shares worth HK$3,8bn held by K Wah International Holdings, and another HK$2,7bn of new shares issued by Galaxy. K Wah is a Hong Kong real estate developer.
Martin Clarke and Guido Paolo Gamucci, partners of Permira Funds, will be appointed as non-executive directors to the Galaxy board, the release said. Gamucci said the investment will be Permira’s first in Asia.
“Permira’s investment is a classic example of how they like to partner with families to grow their businesses, and it’s in a sector they know extremely well,” said Angus Barker, head of financial sponsors Asia Pacific at Deutsche Bank, which advised the private equity firm. Merrill Lynch advised Galaxy and K Wah.
The company also invested in Italian betting company Sisal, and Gala Coral, which operates 31 casinos, 171 gaming clubs and 1600 betting offices, Barker said.
Galaxy, which operates the StarWorld casino in Macau, plans to build nine hotels and serviced apartments on Macau’s Cotai Strip, where it aims to complete its Galaxy World Resort by the end of next year, Chief Financial Officer Nigel Morrison said in August.
The company on September 17 said that first-half loss narrowed on an almost fivefold jump in sales.
Of the stake-sale proceeds, Galaxy will use HK$1,3bn to redeem half of its fixed rate notes. To meet the public float requirement, the company will raise HK$1,3bn in a new share sale arranged by Merrill. The company is offering 150-million shares at between HK$8,42 to HK$8,82, according to a document sent to investors yesterday.
The stake sale to Permira and investors will increase Galaxy’s cash reserves 41% to HK$9,2bn, the company said. Galaxy is run by billionaire chairman Lui Che-woo.
The Lui family will convert the remaining half of the fixed rate notes into 157-million Galaxy shares.
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