March 29, 2017 / 8:34 AM / 3 years ago

Macau's Galaxy, Monaco's SBM team up in race for Japan casino license

TOKYO (Reuters) - Macau casino operator Galaxy Entertainment Group Ltd (0027.HK) on Wednesday said it has partnered Societe des Bains de Mer (SBM) (BAIN.PA), hoping the Monaco peer will help it trump rivals to win a license in Japan’s nascent gambling market.

A logo of Galaxy Macau, part of the Galaxy Entertainment Group (GEG), is displayed at a news conference on the gaming resort's results in Hong Kong, China February 28, 2017. REUTERS/Bobby Yip - RTS10QN3

Galaxy and SBM will jointly develop and run entertainment businesses including casinos and hotels in Japan and the Asia-Pacific region, the companies said in a statement.

“We intend to capitalize on the Monte-Carlo brand,” President Michael Mecca told Reuters in an interview. “All of the entities of Monaco and the principality ... are very enthusiastic about joining us and doing business in Japan.”

SBM is majority-owned by the Mediterranean principality, and since 2015, 5 percent owned by Galaxy. The Monaco firm said it hopes the partnership will help it grow in Asia.

Still, Galaxy faces strong competition to win rights to run a resort in Japan, which legalized casinos late last year.

A host of international operators including U.S.-based Las Vegas Sands Corp (LVS.N) and MGM Resorts International (MGM.N) also aim to enter the market.

The government is drafting a law, due by December, on how to regulate the industry, and people familiar with the matter have told Reuters that Japan will likely pick locations and operators in 2019 and open casino resorts by 2023.

Before the selection process begins, resort operators including MGM and Hard Rock Cafe International Inc have been forming consortia with prospective hosts and domestic companies.

Galaxy is also wooing national and local governments, as well as real estate, construction and transportation firms, but will not insist on a stake of over 50 percent in any consortium, Mecca said.

“We are not coming with a preconceived notion or demand to be a majority shareholder,” he said.

Other operators have taken such positions, with Hard Rock saying it would seek a stake of 40 percent to 60 percent in any consortium.

Galaxy declined to detail the size of any investment in Japan, but said its net cash of $2.1 billion would allow it to begin a project without waiting for financing.

Sands and MGM have said a casino resort would need an investment of up to $10 billion.

Just two casinos in major Japanese cities could generate over $10 billion in annual gaming revenue, rising to $25 billion if 10 further casinos outside metropolitan areas are approved, brokerage CLSA has said.

Reporting by Thomas Wilson and Emi Emoto; Editing by Christopher Cushing

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