Casino billionaire Stanley Ho (何鴻燊) will finally list his company in Hong Kong tomorrow, but the rocky road to the market has highlighted the 86-year-old’s waning dominance of Macau’s gaming industry.
The initial public offering of Sociedade de Jogos de Macau Holdings (SJM, 澳門博彩) was rescheduled last week after his estranged sister made a last-ditch legal effort to block the listing.
Her move was dismissed — although she has since appealed — but the listing process has demonstrated how new competition has forced Ho to refocus the company that helped make his US$7 billion fortune.
“SJM has got a long history of casino operations. What they are not used to is the external scrutiny and regulation,” said David Green, a casino consultant with financial services firm Pricewaterhouse-Cooper in Macau.
Instead of just having to comply with Macau gaming regulations, Green said the listing has forced greater compliance and disclosure for SJM, some of it embarrassing.
As well as for 97 pending labor disputes, four pages of the IPO prospectus were taken up by the unremitting flow of litigation by Ho’s sister, Winnie Ho (何婉琪).
She has 33 lawsuits pending in Macau and four in Hong Kong on issues ranging from the reorganization of the firm, unpaid debts and even the awkward loss of the shareholders’ register.
While the feud feeds the tycoon-obsessed local media, perhaps more telling are the firm’s operating figures since Ho lost his gaming monopoly in the southern Chinese city in 2002 when the market was liberalized.
Its share of gaming revenue decreased from 74.7 percent in 2005, when the first foreign-run rival opened, to 62.2 percent in 2006 and 39.9 percent last year, according to its IPO prospectus.
Both have begun transforming the territory from the “Sin City” of Ho’s heyday to a gleaming, family-friendly destination.
Their bulging coffers have created resorts and attractions that Ho has struggled to emulate, and they have swiped many of his VIP clients, a crucial, if murky, part of the territory’s revenue.
His firm’s gaming revenue decreased from HK$34.2 billion (US$4.38 billion) in 2006 to HK$32.1 billion last year, the prospectus said, at a time when the city’s overall take was skyrocketing to overtake the Las Vegas Strip.
The listing was aimed at solving some of the difficulties.
When it was first mooted in January, SJM hoped to raise US$2 billion. But it will probably raise just a quarter of that because of Hong Kong’s volatile market, combined with persistent questions on whether SJM can adapt to the new competition.
“It’s very difficult to professionalize a traditional gaming business,” said Joseph Fan (范博宏), a finance professor at the Chinese University of Hong Kong, and a specialist on tycoons.
“Lots of values are specific to the founder. In this case, the reason why SJM is successful has to do with Stanley Ho, his relationships with the government and other bodies in Macau.”
Ho’s life history is as colorful as the gleaming towers of his new flagship, the Grand Lisboa casino.
The nephew of one of Asia’s first tycoons, Stanley made his first fortune smuggling luxury goods across the Chinese border from Macau during World War II, according to Joe Studwell’s book Asian Godfathers.
In 1962, he and his business partners won the only gambling license in the then-Portuguese colony, a gold mine he consolidated by running transport businesses and a racetrack.
Along the way, the keen ballroom dancer has cultivated a playboy lifestyle, taking four wives and fathering at least 17 children, two of whom, Pansy (何超瓊) and Lawrence (何猷龍), run rival concessions with overseas partners in Macau.
Pansy’s partnership with US operator MGM Mirage recently raised the issue that has dogged Ho through much of his life, despite never facing criminal charges — is he connected to organized crime?
The alleged link has thwarted efforts to expand operations in Canadian and Australian markets — though he does operate a casino in North Korea — and his daughter reportedly had to convince US regulators of her independence.
The US State Department’s International Narcotics Control Strategy Report said last year that under the old monopoly framework, organized crime groups were “and continue to be, associated with the gaming industry” through control of VIP gaming rooms and activities such as “racketeering, loan sharking, and prostitution.”
But despite the questions, analysts have welcomed SJM’s listing as a positive sign of modernization.
“It’s going to be a long, bumpy road. But if you do not modernize, it is bound to fail,” Fan said.
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