Las Vegas Sands (NYSE:LVS) is preparing to invest up to $103 million to marginally increase its stake in Sands China, bringing its ownership close to 72%. The announcement was disclosed in a regulatory filing with the Hong Kong Stock Exchange (HKSE). An entity named Venetian Venture Development Intermediate II, along with a financial services firm, plans to purchase the Sands China equity. Based on Sands China’s closing price on September 9, the $103 million translates to 59,612,518 shares, equivalent to 0.74% of the gaming company’s freely floating stock.
This move comes after Las Vegas Sands declared last December that it would acquire $243.1 million worth of Sands China equity through Venetian Venture Development Intermediate II. That transaction increased the parent company’s stake in the Macau casino operator to 71.19% from 70%. Sands China holds the distinction of being the largest casino operator in Macau, managing five integrated resorts in the only Chinese territory where gaming is permitted.
The news of Las Vegas Sands boosting its stake in its Macau unit isn’t unexpected, as the company did the same last year. Some analysts speculate that the ultimate aim might be to raise the percentage to above 75%, while not completely buying out minority investors. In a report to clients last month, Seaport Research Partners analyst Vitaly Umansky noted that LVS might eventually increase its ownership of the Macau entity to 75% or more. However, he emphasized that the US-based parent company does not intend to fully acquire Sands China and aims to keep the listing on the HKSE.
Maintaining that listing is crucial as it provides local retail investors and professional market participants in Hong Kong and mainland China access to the stock. This, in turn, demonstrates a commitment to Macau and China, which can be perceived positively by Chinese regulators. In his August note, Umansky mentioned that Sands China is unlikely to resume its dividend payments before next year, despite it being 14 months since LVS resumed its quarterly payouts. Currently, Sands China is one of three Macau operators that does not distribute a dividend.
Another factor making this development unsurprising is LVS’s prior communication to investors about such potential steps following the sale of Venetian and Sands Expo and Convention Center on the Las Vegas Strip over three years ago. That sale yielded $6.25 billion in gross proceeds, with significant portions of the net sum directed towards enhancing Sands’ properties in Macau and Marina Bay Sands in Singapore. The company had indicated to shareholders that a part of this cash could be used to increase its ownership in Sands China. Presently, private equity giant Apollo Global Management operates the Venetian, while VICI Properties owns the property assets of the integrated resort and the convention center.
