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Harrah's Entertainment May Tap Macau Gaming Market by
Purchasing Third-Party Ownership Interests in the Chinese Enclave

By Arnold M. Knightly, Las Vegas Review-JournalMcClatchy-Tribune Regional News

Feb. 2, 2010--Harrah's Entertainment could be close to breaking into the lucrative Macau market with the purchase of a third-party's interest in a gaming company already operating in the Chinese enclave, according to a gaming analyst.

David Bain, a gaming analyst with the financial firm Stern Agee, said in a note to investors last week that the gaming giant is "acutely interested" in buying a 32.5 percent stake in Melco Crown Entertainment, a publicly traded company that owns the City of Dreams and the Altira Macau.

The stake in Melco Crown is held by Australian billionaire James Packer's gaming company, Crown Ltd.

"Our understanding is that the new chief executive of Macau has asked attorneys to review a potential transfer of ownership of Crown's stake to Harrah's," Bain wrote.

Harrah's declined to comment on the report Monday.

Harrah's, the world's largest gaming company by revenue, has been shut out of the Macau market while Las Vegas-based competitors MGM Mirage, Las Vegas Sands Corp. and Wynn Resorts Ltd. have all opened lucrative hotel-casinos.

Harrah's Chairman and Chief Executive Officer Gary Loveman told the Review-Journal in June that the company would be interested in entering the market with its Caesars brand if an opportunity presented itself.

"It is still a terrific market and one we'd like to be active in," Loveman said then. "How we're active is now open to a variety of different alternatives as opposed to building yet another new building. But I think there will be lots of ways to do that over time, so it's a market we still covet."

Harrah's paid $577.7 million in September 2007 for the 175-acre Macau Orient Golf Course and the rights to a land concession contract. The course was rebranded Caesars Golf Macau in December 2008 as part of a nearly $26 million redevelopment of the club.

News of Harrah's interest in Melco comes as Macau continues to set gaming revenue records, extending its lead over the Strip gaming market.

The Portuguese-language press reported Monday that the region's gaming win increased 65 percent to $1.8 billion, a monthly record, according to a note by Susquehanna Financial Group analyst Robert LaFleur.

It is unclear if Harrah's would have to clear any regulatory hurdles in the United States to purchase a stake in Melco Crown.

Lawrence Ho, son of controversial Hong Kong billionaire Stanley Ho, controls 32.5 percent of Melco Crown Entertainment and sits as the company's co-chairman and co-chief executive officer.

Nevada Gaming Control Board Chairman Dennis Neilander said Monday that Harrah's would not have to file for state approvals if the acquisition is only an equity investment.

"If (Harrah's) files for licensure in Macau, they would have 30 days after they file to submit a notification to us under the foreign gaming act," Neilander said in an e-mail. "If they are just buying equity and not going to participate in the operation of gaming, that would come under their quarterly filings (to gaming regulators.) There would be no mandatory approvals required in Nevada."

MGM Mirage is facing scrutiny in Atlantic City, where it owns 50 percent of the Borgata, with its partnership with Stanley Ho's daughter, Pansy Ho, because of her 88-year-old father's alleged connection to Chinese organized crime triads.

Nevada and Mississippi gaming regulators gave their approval to the MGM Mirage's relationship, but New Jersey wants to hold a public hearing on her suitability.

Harrah's exposure in Atlantic City is greater than MGM Mirage's because the company owns four hotel-casinos: Harrah's, Caesars, Showboat and Bally's.

New Jersey regulators had not returned requests for comment on Monday.

Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893.

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Copyright (c) 2010, Las Vegas Review-Journal

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