Melco Crown Philippine unit eyes $300 million top-up placement

Melco Crown started investor education this week for a placement in its Philippines unit to help fund the development of a casino project in Manila.

The Philippine unit of Macau casino operator Melco Crown Entertainment started investor education on Wednesday for a fully marketed top-up placement of about $300 million, a source said.

Melco Crown (Philippines) Resorts, which was formerly known as Manchester International Holdings, is expected to continue the investor education until the end of next week, according to the current timetable, and the management roadshow and bookbuilding will potentially kick off sometime around April 15.

The popularity of the gaming sector at the moment helped the deal to attract decent anchor demand, the source added. After the transaction, the public float of Melco Crown (Philippines) will increase to about 30.42%, from 10.01%, assuming the overallotment option is not exercised, it said in a statement earlier this week. By tripling the size of its float, the deal is in effect a re-IPO.

Melco Crown (Philippines) plans to use part of the proceeds from the transaction to fund work on the development of an integrated casino, hotel, retail and entertainment complex within the Bagong Nayong Pilipino-Entertainment City precinct in Manila, according to the statement. MCE Holdings, MCE Holdings No 2, MCE Leisure, SM Investments, local property developer Belle, and gaming and leisure company PremiumLeisure and Amusement (PLAI) are co-licencees of the provisional licence for the development of the project, it says.

According to a separate statement in March, the company is responsible for contributing at least $500 million to the $1 billion project, while Belle, SMIC and PLAI are also responsible for at least $500 million.

The equity transaction consists of a base deal of up to 1 billion shares and an overallotment option of up to 200 million shares. The company has said in a filing the deal size will be a maximum of $400 million.

Based on the closing price of the company’s stock on Wednesday at Ps14.04, the base deal size currently works out to be about $343 million, with an expected deal size of about $300 million. The stock was up 0.3% on Wednesday, while the Philippine Stock Exchange PSEi Index rose 1% that day.

The first part of the transaction consists of the offer and sale of common shares of the company by controlling shareholder MCE Investments of a portion of its existing shares in the company, according to the statement. The second part of the transaction involves the concurrent subscription by MCE Investments and the issuance by the company to MCE Investments of new shares in the same number and at the same price as the shares sold in the offer. The offer price will be determined through a bookbuilding process after the international roadshow.

MCE (Philippines) Investments and MCE (Philippines) Investments No 2 currently own a combined 89.99% stake in Melco Crown (Philippines), and their combined stake will fall to 69.58% after the deal is completed, according to the statement.

Citi and UBS are arranging the deal.

In December, Melco Crown announced that it would pay about $30.8 million for a 93.06% stake in Manchester International. Its existing Philippine businesses were acquired by the listed entity. The name change and the new share issue were both approved at a special shareholders meeting in February.

The casino group currently operates Altira Macau casino hotel, the City of Dreams resort and the Mocha Clubs, which is the biggest non-casino based operation of electronic gaming machines in Macau. It is also developing the planned Studio City Project, a cinematically themed integrated entertainment, retail and gaming resort on the Cotai strip.

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