Leaving Las Vegas Is the Right Move for Sands -- Heard on the Street
By Jacky Wong
Leaving Las Vegas may not be heartbreaking for Sands.
Las Vegas Sands on Wednesday announced that it will sell its
properties in Sin City for $6.25 billion. Private-equity giant
Apollo Global Management will take over the operations, which
include the Venetian Resort and its convention center, for $2.25
billion while real-estate investment trust VICI Properties will buy
the real estate for $4 billion.
The deal isn't exactly a surprise since Sands has been in talks
to sell them for months, but it comes at a historic time for the
company: Its founder Sheldon Adelson, who started building the
gambling empire in the 1980s after making his fortune from
personal-computer trade shows, died in January.
Losing both its founder and where it all began may tug at the
heartstrings, but Sands got a good price. The $6.25 billion
represents 12.8 times 2019 earnings from the properties before
interest, taxes, depreciation and amortization. And 2019 was an
exceptionally good year. Bernstein says Sands' business in Las
Vegas likely won't get back to that level until after 2023.
Sands has actually been an Asia-centric company for a long time
already: Las Vegas only accounted for 9% of Sands' Ebitda in 2019.
It makes sense to redeploy cash into its casinos in Macau and
Singapore to serve the nouveau riche in the region. One potential
risk of staking it all on Asia: Sands' casino license in Macau is
set to expire in 2022. A new tender for the licenses may introduce
more unfavorable terms or new entrants to the market. U.S.-China
geopolitical tensions also represent a risk, though so far American
operators in Macau haven't been affected.
Sands also mentioned potential opportunities in online casinos,
sports betting or regional casinos in Texas and New York City. Mr.
Adelson was notable for his objection to online gambling so his
death may open the door for the company to go into this
fast-growing business, but it would face strong competition.
Caesars Entertainment is buying U.K. bookmaker William Hill.
Another U.K. bookmaker, Entain, rejected a bid from MGM Resorts,
though the two already have an online-gambling joint venture.
It's no sure thing that Sands would find success in those new
markets, but one thing is more certain: The company will probably
return at least some of the proceeds to shareholders. Sands
suspended dividends last year as Covid-19 hit, and the new cash
would allow the company to resume payouts sooner.
Sands without Las Vegas looks like a smart move for the company
and could pay off in the near term for investors--even if it
doesn't have quite the same ring.
Write to Jacky Wong at JACKY.WONG@wsj.com
(END) Dow Jones Newswires
March 04, 2021 05:53 ET (10:53 GMT)
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