Macau VIP gambling room investor Iao Kun Group Holding Co Ltd said on Tuesday that it plans to shift the company’s overall strategy and focus on the Chinese technology industry.
As part of the new strategy, Iao Kun announced it would acquire 51 percent of Jia-Heng Industrial Ltd, the holding company of Guangzhou LiNiu Network Technology Co Ltd. The latter is a software technology development company that is currently developing a business-to-consumer electronic trading platform focused on mainland China’s agricultural sector, Iao Kun said in a press release.
Iao Kun’s VIP room gaming promoters and collaborators oversaw five VIP gaming facilities in Macau as of the end of August. But the firm announced on September 2 a “comprehensive strategic review” of its operations in Macau in order to “enhance its operating performance”.
The company has since shut down four of its promoted Macau VIP rooms and is facing a bankruptcy claim from one of the Macau-based casino operators. The junket group now only promotes a single VIP room in Macau, located at City of Dreams Macau, a property run by casino operator Melco Crown Entertainment Ltd.
“Over the last few months, we have conducted an extensive review of our operations and our business strategy in order to right-size Iao Kun and find a path where we believe we can create long-term value for our shareholders,” said Lam Man Pou, the company’s chairman, in a prepared statement.
He added: “After recently completing the review, we concluded that we did not see a path forward toward rebuilding our VIP gaming portfolio. While we will continue to participate in the promotion of our VIP gaming room in Macau, we have no further plans to expand our gaming operations to additional VIP rooms.”
Nasdaq-listed Iao Kun had previously tried to diversify outside of Macau by acquiring the Jeju Sun Hotel and Casino in Jeju – on Jeju Island in South Korea – from Philippines casino operator Bloomberry Resorts Corp. The deal – worth approximately US$100 million – fell through however as Bloomberry said the buyer did not have enough funds to complete the deal.
In Tuesday’s announcement, Iao Kun said it now plans to diversify into non-gaming assets. Mr Lam said that the company has identified “several opportunities to diversify from the gaming sector which we believed were attractive from a value-add standpoint”.
“After appropriate due diligence, we made the determination to acquire a majority interest in LiNiu Network and will be focusing our near- to mid-term efforts on successfully launching its trading platform and rapidly scaling the business,” Iao Kun’s chairman stated.
Iao Kun in September was granted a six-month grace period to become once again compliant with the minimum bid price of US$1.00-per-share necessary for its listing in Nasdaq.
The acquisition of LiNiu Network would not require up front cash payment, noted Iao Kun on Tuesday. The firm added it would issue 12.484 million ordinary shares of the company upon the closure of the transaction, “as well as cash consideration that is contingent upon LiNiu Network achieving after-tax income targets”. It is anticipated the acquisition deal will be closed before the end of the current quarter.
In the release, Iao Kun said that LiNiu Network is currently internally testing its new electronic trading platform, which is scheduled to launch before the end of the first half 2017. Through the platform, the LiNiu Network will cover production and service businesses linked to the agricultural sector, including production, sideline products, ecotourism, finance and market information, said Iao Kun. LiNiu Network expects to generate revenue through commissions, advertising and guarantee deposits.
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”Continued negative coverage of the Abe administration, coupled with political losses for the Liberal Democratic Party ... may reduce support for the gaming agenda, which already has only limited public support”
Analyst at brokerage Sanford C. Bernstein