The operator of Macau casino venue the Grand Emperor Hotel, Hong Kong-listed firm Emperor Entertainment Hotel Ltd, says it is buying for the equivalent of about US$268 million, a portfolio of three hospitality-related properties in Hong Kong from its parent company, Emperor International Holdings Ltd.
The acquisition is via Emperor Entertainment purchasing the entire equity interest in a subsidiary of Emperor International, plus a loan due to the parent. The transaction involves a consideration of approximately HKD2.08 billion (US$267.8 million), the vendor and the purchaser said in a joint filing to the Hong Kong bourse on Tuesday.
The document added that, “in recognition of support” by Emperor Entertainment’s shareholders, the company’s board was proposing to declare a special dividend of HKD0.05 per share. Emperor International also proposed to pay a special dividend, amounting to HKD0.01 per share.
Emperor Entertainment runs the 311-room Grand Emperor Hotel on Macau peninsula. As of September 30, 2020, the property’s casino – operating under the SJM Holdings Ltd gaming licence – had 67 mass-market tables, capacity for 180 slot machine seats, and a self-managed VIP gaming room with 10 tables. The firm also operates the non-gaming IHM hotel on Macau’s Taipa Island.
Emperor International has a stake of around 70.3 percent in Emperor Entertainment, according to Tuesday’s filing.
The Hong Kong properties involved in the deal are the 299-guest-room Emperor Hotel; and two service apartment buildings. All are located on Hong Kong island.
The filing said Emperor International planned to use the net proceeds from the transaction for payment of the proposed dividend (involving an expense of HKD36.8 million), with the balance of approximately HKD2.05 billion to be used as working capital, including for “property investments and property construction projects”.
The document stated that the transaction would enable Emperor Entertainment “to expand its business coverage beyond Macau and widen the income source” of that company. It added that the firm would retain its “core focus on gaming hotel” business, “with an extension of market presence in the regional hospitality sector”.
Casino gaming is not legal in Hong Kong.
The firms stated in the filing that the deal could help them achieve “better delineation of assets, resources (both tangible and intangible) and business activities among Emperor International and Emperor Entertainment, and streamline the decision-making process of respective management teams.”
The management of Emperor Entertainment “considered the transaction a good opportunity to utilise its financial resources by acquiring several hotel and hotel-related properties at softening valuation,” the filing stated.
It added that the management of Emperor Entertainment also considered that, assuming completion of the deal, the firm would still “retain sufficient financial resources” and thus it was “appropriate to distribute [a] special dividend” to shareholders.
Emperor Entertainment posted a loss of HKD141.8 million for the six months ended September 30, 2020, compared to a profit of HKD177.2 million a year earlier. The firm said at the time its performance had been negatively affected by the Covid-19 pandemic and related travel restrictions. It added that had led to a significant decline in gaming revenue at the Grand Emperor Hotel. Casino revenue at the property decreased by almost 91 percent during the reporting period, to under HKD51.1 million.
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