HONG KONG (Reuters) - Private equity firm Permira PERM.UL has agreed to buy a fifth of Macau hotel and casino operator Galaxy Entertainment Group (0027.HK) for nearly $840 million (420 million pounds), staking a claim in the world’s largest gambling arena.
Permira said on Thursday it would pay HK$6.5 billion (412 million pounds) for a 20 percent stake in Galaxy, which plans to build the world’s second-largest casino.
Macau, the only city in China where gambling is legal, has attracted billions of dollars in investment in past years from the likes of the Las Vegas Sands (LVS.N) and Wynn Resorts (WYNN.O), after the government abolished a decades-old gambling monopoly enjoyed by tycoon Stanley Ho.
“There’re abundant opportunities in the region, particularly in China,” said Martin Clarke, a partner at Permira.
The firm plans to set up shop in Hong Kong in the first half of 2008, Clarke said. He and fellow Permira partner Guido Paolo Gamucci will join the Galaxy board as non-executive directors.
Galaxy, which operates the five-star StarWorld Hotel and is developing the 2,500-room Cotai Mega Resort in the former Portuguese colony, increased revenue nearly five-fold to HK$6.332 billion in the first half of 2007.
It also expanded earnings before interest, tax, depreciation and amortisation (EBITDA) four-fold to HK$737 million.
The Hong Kong firm said Permira would buy 452 million shares from Galaxy shareholder and mid-tier property firm K.Wah International Holdings (0173.HK) for HK$3.8 billion, and another 323 million new shares from Galaxy for HK$2.7 billion.
Galaxy will also sell 150 million new shares to institutional investors at HK$8.42-HK$8.82 apiece.
After the deal, Hong Kong tycoon Lui Che Woo -- chairman of both Galaxy and K.Wah -- and his family will retain 52 percent of Galaxy, which would see outstanding debt reduced by 29 percent to HK$6.5 billion.
Lui cited Permira’s heavy investments in retail and consumer sectors with recently acquired brands such as Hugo Boss BOSG_p.DE and Valentino V.MI in its portfolio, as a major draw for Galaxy.
“Permira can help us develop our retail, tourism businesses. We can share our experience,” Lui told reporters on Thursday.
Trading in shares of Galaxy and K. Wah, which owns 18.6 percent of Galaxy, had been suspended since Friday afternoon and Monday, respectively, pending details of the deal.
Merrill Lynch MER.N advised Galaxy and K.Wah on the deal while Deutsche Bank (DBKGn.DE) and others advised Permira.