Macau casino operator SJM Holdings will not pursue a planned acquisition of Ponte 16, one of the city’s last remaining satellite casinos. The move followed a 91% third-quarter drop in net profit for SJM, one of Macau’s Big 6 concessionaires.
“After a comprehensive business review and after a thorough assessment of long-term business planning … SJM Resorts will not proceed with the acquisition,” said the Hong Kong-listed company in a Wednesday statement. As part of a termination agreement with 51%-owned subsidiary Pier 16 Entertainment Group Corp, Ponte 16 will close at midnight on 28 November.
Its gaming tables and machines will move to other SJM casinos. Locals employed by SJM Resorts will “be reassigned to other casinos”, the company said. Ponte 16 workers who do not work directly for SJM can “apply for related vacancies within the group”.
SJM to proceed with L’Arc Macau acquisition
Under Macau’s amended gaming laws, satellites have until 31 December to shift from a profit-sharing model to one in which they are directly owned by licensees. The acquired casinos will then make their money through management fees, not shared revenues.
SJM originally planned to close seven of its nine satellites and acquire both Ponte 16 and L’Arc Macau. The latter deal is still on. SJM inked a deal to buy Arc of Triumph Development Co Ltd for HKD$1.75 billion (US$225 million). It described L’Arc as a “well-established” property in the peninsula’s “most concentrated and high-performing entertainment and hospitality cluster”.
SJM Chairwoman and Executive Director Daisy Ho said the casino at L’Arc Macau is “currently operating below its full potential”. However, she added, “[W]e see considerable room for growth as part of a stronger, integrated network under SJM Resorts. This acquisition will allow us to enhance coordination across our peninsula properties in a unified structure that enhances operational efficiency and unlocks cross-promotional synergies.”
Long-term effect of satellite closures
Macau Chief Executive Sam Hou Fai says the satellite closures will have minimal impact on the city’s financial system.
“As of the end of September, loans to companies managing satellites accounted for less than 1% of total bank loans, making the financial impact controllable,” Hou said.
But analysts have expressed concern about the effect on businesses in the neighbourhoods where satellites once operated.
Ricardo Siu, associate professor of business economics at the University of Macau, has warned that loss of the satellites could hamper local economies. “It’s reasonable to expect that the flow of consumers and the absolute value of spending in these areas will slow down,” Siu told Plataforma Media in June. “The vitality of businesses and employment opportunities in these areas will be negatively affected.”
Real estate consultancy Jones Lang LaSalle added that property values in the ZAPE and NAPE districts could drop by up to 40% after the closures.
Following a 91% drop in third-quarter net profit, Macau gaming concessionaire SJM Holdings shelved its planned acquisition of satellite casino Ponte 16.