Sands Sells Las Vegas Properties To Apollo,Vici For $6.25 Billion

Las Vegas Sands Corp (LVS)., the biggest casino operator globally has agreed to sell its properties in Las Vegas to Apollo Global Management Inc. and Vici Properties Inc. for  $6.25 billion. This enables the company to concentrate on its successful Asian resorts and access other potential opportunities within the U.S. In a joint statement on Wednesday, the purchasing companies revealed that the properties will be owned by the real estate investment trust, Vici, while Apollo will run the properties.

Before the pandemic hit, the Venetian, Palazzo, and other related convention facilities contributed less than 15% of the company's revenue. Sands grew by 2.8% to $66.77 in New York trading, while Vici went up with 2.3% to $29.12 and Apollo amassed 2% to $50.90. When Sands nudged advisers to seek interests in the properties, it sent out hints that it no viewed Las Vegas, its resident field of operation, as a priority. The company's spending capital plans at all its resorts are fixed at $5 billion over the next five years.

Most of this capital is focused on Macau and Singapore which produced 85% of its revenue in 2019. Sands Chief Executive Officer Robert Goldstein said in the statement, "This company is focused on growth, and we see meaningful opportunities on a variety of fronts. Asia remains the backbone of this company and our developments in Macau and Singapore are the center of our attention." Although the late founder Sheldon Adelson who died in January, scorned online gaming on moral grounds, the company is considering a position in this fast-growing field.

On the other hand, Apollo is banking on a speedy comeback for the Mecca of America's gambling. It intends to promote the resort particularly to gamblers and petition consumer tie-ins using other companies in its portfolio. The resort is expected to serve as a central point for the rapidly growing sports betting business in the U.S. Apollo Partner Alex van Hoek in a statement said, The investment "underscores our conviction in a strong recovery for Las Vegas as vaccines usher in a reopening of leisure and travel in the United States and across the World".

Recently Apollo has been making lots of investments in the gambling business that includes one of Canada's largest casino companies, Great Canadian Gaming Corp., and European lottery operator, Sazka Group.  Alongside TPG, Apollo for several years owned Caesars Entertainment Corp., which was taken private by the firms at a $30.7 leveraged buyout of the market in 2008. The company had struggled for years under the burden of its debt load before all its investors sold out. The Las Vegas Convention business has been hit hard by coronavirus and additional large gathering restrictions.

Seller Financial Services

The terms in the contract stipulate that funds associated with Apollo will gain the operating assets and liabilities of the Las Vegas enterprise with about $2.25 billion, this includes $1.2 billion in seller financing. Vici on the other hand with about $4 billion in cash purchased the real estate and all related assets of the Venetian. This sale marks Sands' withdrawal from the U.S gambling business.

 The Venetian, Palazzo and Sands Expo Convention Center are all connected along the Las Vegas popular Strip. The money from the sale would allow the company to find other growth opportunities. As the company stepped away from the competition to build a casino in Japan last year which is resulting from conditions described by executives as unfavorable. However, the company is intent on building in New York and Texas is also considered another potential market base.

This move to Texas may be threatened by the opposition of some prominent legislators to casino legalization. Currently, Sands is the only major operator in the U.S without a nationally focused sports betting business. The CEO, Goldstein has held conversations with potential partners, which has a likelihood of more focus as cash proceeds from sale. Goldstein states, that the current deal will "pay tribute to Mr. Andelson's legacy while starting a new chapter in this company's history."

Retaining the Headquarters

Sands will be retaining its corporate headquarters in Las Vegas. Led by Sheldon's widow Miriam, the Andelson family will maintain a presence and retain their ownership of Las Vegas largest newspaper, the Las Vegas Review-Journal. The current president of Sands is Miriam's son-in-law,  Partick Dumont. There is a possibility that the company may resume its dividend, stock buybacks, and debt retirements especially when the business booms in Asia.

The company is also financing $1.2 billion of Apollo's investment price. This comes with a six-year note that starts at 1.5% interest and is expected to rise to 4.25% after three years. The financial adviser to Las Vegas Sands in this latest deal is Goldman Sachs Group Inc., and Skadden, Arps, Slate, Meagher & Flom LLP served as legal adviser.