Hong Kong-listed lottery firm Melcolot is selling a $50m stake in a Georgian casino project to Taiwanese gaming device maker Firich Enterprises Co. (FEC). Melco, an offshoot of Melco International Development, controls a ‘special purpose vehicle’ named Express Wealth Enterprise that holds a 15-year casino license in the former Soviet republic’s capital, Tbilisi.
Shares in this SPV have now been promised to Firich, which intends to split its holdings between two companies, Rich Development and Syncmold. A local investor, Oz Gaming Georgia, has taken a token stake in the SPV. The final split looks like this: Melcolot (42.7%), Firich (31.62%), Rich Development (15.25%), Syncmold (8.33%) and Oz Gaming (2%).
MelcoLot will be responsible for managing the SPV, dealing with the local government and handling gaming operations. Firich will supply gaming equipment and Rich Development will handle food and bev. The casino expects to welcome guests from European, Turkish and Middle East countries when it opens its doors to the public early in 2016.
Firich has significant holdings in another Melco subsidiary, making the share sale a connected transaction. Firich is also connected to Melco via the Oriental Regent joint venture in Russia’s Primorye gaming zone near Vladivostok. The project, which is scheduled to open in April, is majority controlled by companies connected with Melco International’s Lawrence Ho while Firich holds a 25% stake.
GEORGIA CASTS A NERVOUS EYE NORTH … AGAIN
Surrounded by neighbors with strict prohibitions on gambling, Georgia’s casinos have become a magnet for gamblers from Turkey, Azerbaijan and Iran, to the point where gaming revenue accounted for 2% of the state’s 2013 budget. The Black Sea port of Batumi has five casinos and two more set to open next year. It helps that annual license fees are US $137k compared to $2.84m in Tbilisi. Even better, build a 100-room hotel alongside the casino and license fees are frozen for a decade.
Batumi is located 370km south from the port of Sochi, which was officially included as part of Russia’s Krasnodar gaming zone this year. That has some Batumi operators worried, especially since Sochi has a better climate and lengthy visa-free allowances for visitors from Azerbaijan and Turkey. Sochi is also struggling to pay off its Winter Olympics expenses so it could presumably prove willing to do what it takes to attract major international investment.
Batumi will have a couple years at least in which to study their Russian rival’s development. Ian Livingston, managing director of Tbilisi’s Casino Adjara, said much would depend on the scale of their competitors. Livingston told Eurasia.net that if Sochi were to attract major developers and morph into a “mini-Vegas,” Sochi’s small-scale casinos could have a fight on their hands for foreign tourists.