Las Vegas Sands drops $10bn Japan casino pursuit

Wednesday 13th May 2020

Las Vegas Sands, the US casino operator that boasted it would spend $10bn to secure a foothold in Japan's future gaming market, has dropped out of bidding for a licence to operate in the world's third-biggest economy.

The decision by Sheldon Adelson, LVS's billionaire chief executive, throws more doubt on the Japanese government's vision for a thriving casino industry involving multiple "integrated resorts" and a market analysts projected could become the world's second-largest after Macau, given once-bullish forecasts for Chinese outbound tourism.

The abrupt pullout ends an LVS charm offensive in Japan that began in the early 2000s -- years before the administration of Prime Minister Shinzo Abe broke with tradition and pushed through a bill in 2016 that legalised casino gaming.

It comes as the coronavirus pandemic has wrought havoc in the global gaming sector, prompting suspended dividends, shattered market valuations and low-priced stake sales. LVS and its industry peers have been forced to halt operations at most critical sites in Las Vegas, Macau and Singapore.

However, an LVS spokesman said its decision on Japan was not related to financial constraints or the current global health crisis.

Mr Adelson cited the unfavourable framework around Japan's future casino industry. "While my positive feelings for Japan are undiminished," he said, "the framework around the development of an IR [integrated resort] has made our goals there unreachable."

LVS would now focus on other opportunities, Mr Adelson said.

It was unclear from the LVS statement, said industry analysts who were not immediately authorised to comment publicly, whether the company would consider returning to the Japanese bidding process should the framework be tweaked. LVS declined to comment on that possibility.

According to people familiar with the matter, management did not feel there was likely to be a receptive audience on the issues raised.

Although the various bidding processes have been effectively suspended by the coronavirus pandemic, Japan's plan was to grant licences to three cities that would then accept bids from casino operators and their consortium partners.

LVS, Melco, Genting and others initially expressed enthusiasm for a site in Osaka but most had dropped out of that process, leaving MGM unchallenged. LVS had switched its focus to Yokohama and Tokyo, which it regarded as the more lucrative prizes.

Despite the many bullish projections, some investors have questioned the true financial potential of a Japanese casino industry given what is known as the "10-year problem": the licences that were to have been issued this year will only last for a decade -- a significant obstacle for companies attempting to secure bank financing.

While Japan's slow progress towards legalising casinos has generated great corporate excitement, the project has failed to garner much support among the Japanese public.

The antipathy deepened in December after the arrest of Tsukasa Akimoto -- a former state minister and ruling party politician who helped shape the rules by which Japanese casinos will operate -- on allegations he took $33,000 in bribes from a Chinese online sports lottery operator. Mr Akimoto has denied all the allegations.

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