My Odd Couple column last November highlighted the issues surrounding Savan Vegas casino in Laos. The Lao government put Savan Vegas out for bids after seizing the casino resort from its foreign owners. There’s not much reason to expect a better ending for any (foreign) owner in a country without a strong regulatory framework, where the government can make up the rules as it goes along. True to form, albeit unexpectedly, after going through an international auction process to within days of its scheduled conclusion, Laos sold Savan Vegas for US$42 million, a fraction of its appraised value, to Macau satellite casino operator and developer Macau Legend.
The story began far more promisingly last October. The Government of the Lao People’s Democratic Republic hired San Marco Capital Partners from the US to broker the sale of Savan Vegas, which has 93 tables and nearly 500 machines on its gaming floor, plus 476 hotel rooms, food and beverage outlets, retail and convention facilities on 50 hectares in Savannakhet, just over the border from Thailand. In late March, San Marco issued a list of six qualified buyers that included Nasdaq listed Macau junket promoter Iao Kun Group, Macau Legend, a consortium led by Malaysian listed gaming machine maker, distributor and contract operator RGB, and Silver Heritage Limited, a casino and machine operator across Southeast Asia as well as Nepal. Bids to purchase the resort complex and receive a concession to operate it for 50 years were due on May 10, to be opened at a public ceremony.
In early May, there were signs something was amiss. RGB issued a statement to the Malaysian stock exchange that the bidding had been canceled. Sanum Investments, which operated Savan Vegas until the government seized it amid allegation of tax liabilities, said it was suing the Lao government to try to suspend the sale process and suing San Marco for its management of the casino and sale. A week later came announcement that Macau Legend had bought Savan Vegas for US$42 million.
“We can leverage on Macau Legend’s experience and connections to build on the already more than one million annual visitors to Savannakhet,” Macau Legend Co-chairman, Executive Director and CEO David Chow said in a company news release. “In addition to the existing facilities, the parties are also discussing the development by Macau Legend of a land parcel in the Savan Seno Special Economic Zone of the Savannakhet Province of the Lao PDR which is adjacent to the existing Savan Vegas Hotel and Entertainment Complex. The planned development would include two golf courses, a 600 room hotel, villas, casino, exhibition hall and spa, pool facilities, staff quarters and training facilities.”
Insiders say the Lao government unilaterally short-circuited the bidding process and chose Macau Legend. On its website, Sanum, privately held and incorporated in Macau, claims it had a deal with the Lao government to sell Savan Vegas for its agreed “maximum value” of $250 million and that Sanum is entitled to 80% of that amount. A person with knowledge of the process requesting anonymity says the property was independently appraised at US$200 million. In any case, Macau Legend paid less than a quarter of Savan Vegas’ apparent value.
“The government’s decision, taken hastily and in the dark of night, to make a wholly non-transparent agreement with Macau Legend, nominally for $42 million, is suspicious,” Sanum Investment says in an exclusive interview via email. “Specifically, Macau Legend reports that it is making an investment of hundreds of millions of dollars to develop of an adjoining property in a murky side deal. This raises serious question about the integrity and transparency of both the government of Laos and the leadership of Macau Legend. In a transaction so fraught with irregularities and secrecy, we cannot help but wonder what the ‘real sales price’ is, and who is receiving those funds.”
About all that’s clear at this point is that there’s plenty to keep lawyers busy. The inside source says the government was convinced by an outside advisor that Macau Legend was the only “qualified” bidder. But running a casino appears within the capabilities of each short-listed bidder. Some, such as Silver Heritage, also have development experience; moreover, anyone can hire it. The source thinks the advisor wanted to drive the price as low as possible for reasons unknown. As implausible as that sounds, it’s less improbable than things going smoothly and accountably when it comes to casinos in frontier markets such as Laos.
As editor at large for Inside Asian Gaming following nearly a decade as a special correspondent for Macau Business magazine, I cover the casino business in Macau and throughout Asia. I’m also a columnist for Asia Times and The Guardian. After writing in the US for The New York Times, Washington Post, Sports Illustrated and others, I joined CNN as a news writer and producer in Washington, then moved to Hong Kong in 1995 (for six months, I thought) as a producer with CNBC. In Hong Kong, I returned to print at Bloomberg as a regional business editor, worked as an editor at both Hong Kong English language dailies, and headed Asia-wide media relations for a top US multinational. I’m also the author of Hong Kong On Air a novel set during the 1997 handover about TV news, love, betrayal, highHong Kong On Air finance and cheap lingerie, and founder of Writing Clinic, where writing gets better. You can follow me via my website www.muhammadcohen.com, on Facebook and Twitter @MuhammadCohen.