MGM Resorts Teams with Orix in Bid for Osaka License, Casino Giant Would Cede Controlling Stake in Japanese Project
Posted on: March 26, 2019, 12:30h.
Last updated on: March 25, 2019, 05:01h.
MGM Resorts will partner up with Japanese financial services group Orix in its bid for an integrated resort in Osaka, Japan’s third largest city.
The tie-up is the first to be announced between an international casino operator and a domestic company and it fits neatly with MGM’s recently announced “Osaka First” policy. Orix was founded and is based in Osaka, which has been identified by the casino giant as its number-one choice for a Japanese casino.
MGM CEO Jim Murren said last week the company had taken the big decision to “focus all our energy on Osaka,” which in 2025 will host the World’s Fair. City officials believe the expo will draw 28 million visitors — just in time for the first resort to open.
“We believe Osaka is going to be the first integrated resort location,” said Murren. “The government is very excited about it.”
Osaka Fighting Off Suitors
The bad news for Murren is that Osaka has also emerged as the preferred destination of a glut of other international casino operators, including LVS, Melco International, Galaxy Entertainment, and Genting.
With just three licenses up for grabs and just one in each host city, the competition to woo Osaka is heating up.
MGM’s move for a homegrown partner is also only just the beginning — more Japanese companies are expected to come on board to form a consortium that will hope to finance, construct, and own a future MGM-branded integrated resort.
The requirement for international operators to partner up with domestic companies has been established by the Japanese government as part of the new licensing regime, but the Orix deal reveals the extent to which the government is taking this.
MGM and Orix will be equal partners in the venture, which means that MGM will not be a controlling partner.
Will LVS Tolerate Non-Controlling Stake?
Senior research analyst at Sanford C. Bernstein Vitaly Umansky said in a note Monday this was “the first clear sign the casino operators may have less than 50 percent or controlling stake.”
While LVS is widely considered to be a frontrunner for at least one of the licenses — and is eyeing Osaka — analysts speaking at the ASEAN Gaming Summit in the Philippines last week wondered whether chairman and CEO Sheldon Adelson would want to get involved in a project in which his company did not have full control.
Adelson once said he would spend $10 billion — or “whatever it takes” — to gain a foothold in a Japanese market that could be worth up to $15 billion a year by 2025. But to what extent is he willing to share the potential spoils?
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