MGM Emerges as Frontrunner For Osaka Integrated Resort

MGM Resorts International has emerged as one of the frontrunners for an integrated resort in Osaka, Japan.

Most forms of gambling are illegal in Japan, but that stance is changing. Japanese lawmakers approved a bill in July 2018 to officially allow casinos in the country. Three casino sare approved at different locations, each an integrated resort. Restrictions apply to the integrated resorts. These include Japanese locals only being able to visit the casino three times per week, or 10 times per month. An entrance fee of 6,000 Yen for Japanese locals applies to discourage addiction.

Official bidding for an integrated resort has not yet opened, but MGM are one of the favourites to secure one. MGM’s chances increased with the news Melco Resorts & Entertainment and Las Vegas Sands are concentrating on other Japanese locations.

MGM Helped By Melco Looking Elsewhere

Analyst Alex Bumazhy spoke to the GGRAsia website and explained the current situation.

“The exit of Las Vegas Sands and Melco Resorts from Osaka certainly increases the probability that the MGM/Orix consortium, which was already a strong contender, wins the RFP request-for-proposal there. However, a handful of other operators that have not pulled out of Osaka yet, such as Genting Group and Wynn Resorts Ltd, also have a decent chance.

Bumazhy added, “Our sense is that whatever ends up being built in Osaka will be world class and will be the maximum investment the winning operator could make before jeopardising their return on investment thresholds. None of the major public operators that are left in the race are known for underinvesting when looking at their recent portfolios, and all have solid financial profiles as well as development and operating experience”

Osaka is a major financial city in Japan and any integrated resort will thrive. MGM, with Japanese partner Orix Ltd, face competition for a licence. Asian giant Genting and Las Vegas’ Wynn Resorts are interested in an Osaka property.

Wynn Resorts a Challenger to MGM

Wynn Resorts looked into an A$10 billion takeover of Australia’s Crown Casino earlier this year. Discussions ended abruptly after news of the potential deal leaked to the press.

Melco and Las Vegas Sands both state they are concentrating efforts in Yokohama, Japan’s second-largest city. Lawrence Ho, Melco’s CEO, said his company has adopted a “Yokohama first” strategy in its bid for a Japanese licence. Ho said Yokohama is “an ideal candidate for a large-scale development”, particularly one aimed at premium international tourists.

It is not known if the current investigation into Melco’s purchase of Crown shares will impact their Japanese bid.

MGM looks set for a financial windfall as reports claim it is about to sell its Circus Circus casino. Circus Circus is a 3,767-room development that recently posted second-quarter revenues of US$65.9 million. Billionaire businessman Phil Ruffin, 84, will pay US$1 billion for Circus Circus. Ruffin and MGM have done business before, back in 2008. The Texan bought Treasure Island Las Vegas for $775 million.

A cash injection of up to $7 billion could also be heading the way of MGM. US news outlet Bloomberg last week reported a private equity firm was showing serious interest in two MGM properties. Bloomberg reported MGM is close to selling the iconic MGM Grand and Bellagio to Blackstone Group for $7 billion.

Consolidation Continues in Las Vegas

The deal gives MGM Resorts the option to lease back both prominent properties. Blackstone recently raised a $20.5 billion war chest to increase its property portfolio. It already owns The Cosmopolitan of Las Vegas having purchased it for $1.8 billion last year.

Caesars completed a similar deal on Monday. The owners of the WSOP sold the Rio All-Suite Hotel & Casino to Imperial Companies for US$516.3 million, but are leasing it back for at least two-years.

MGM has nine casinos in as Vegas and another in Macau among its many properties.