Leaving Las Vegas: Sands May Do Just That as Rumors Swirl on Fate of Venetian, Palazzo

Posted on: October 26, 2020, 04:06h. 

Last updated on: October 26, 2020, 04:39h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Shares of Las Vegas Sands (NYSE:LVS) jumped during Monday’s after-hours session following a report that the company is mulling a sale of its Sin City operations in a transaction that could fetch up to $6 billion.

Venetian Sale
The famed canals at the Venetian Las Vegas. Sands is rumored to be in talks regarding a $6 billion sale of its Las Vegas assets. (Image: Wall Street Journal)

Bloomberg originally reported the chatter earlier Monday afternoon. Casino.org reached out to LVS for comment, but did not hear back prior to publication of this article.

With a market capitalization of $37.52 billion at Monday’s close, LVS is the world’s largest gaming company by that metric. But its footprint in its namesake city is relatively small. While the Venetian and the Palazzo on the Strip are two of the most plush integrated resorts in the US, Sands derives the bulk of its earnings before interest, taxes, depreciation and amortization (EBITDA) and revenue from its Asia-Pacific operations, centered in Macau and Singapore.

When the company delivered third-quarter results last week, it posted a surprise adjusted EBITDA profit of $70 million at Marina Bay Sands (MBS) in Singapore, while the Las Vegas business lost $40 million during the July through September period.

Likely Limited Number of Realistic Suitors

Assuming LVS does move forward with divesting its Nevada operations, the timing is less than optimal because the coronavirus pandemic is depressing gaming real estate prices.

Conversely, it’s rare that Strip assets with the brand recognition and cache of Sands Convention Center, Venetian and Palazzo come up for sale. With gaming companies easily raising cash in capital markets, there are likely to be plenty of interested suitors.

How many can credibly pull off such a deal is another matter. In addition to LVS, just four other traditional domestic gaming companies have market caps in excess of $6 billion. By process of deduction, Caesars Entertainment (NASDAQ:CZR) can be eliminated because it’s still digesting a massive takeover while trying to wrap up a bid for William Hill. Penn National Gaming (NASDAQ:PENN) is likely out because it’s looking to reduce debt and could be more Las Vegas seller than buyer.

That leaves MGM Resorts International (NYSE:MGM) and Wynn Resorts (NASDAQ:WYNN). The former is already the largest Strip presence, while the latter, like LVS, is far more focused on Macau.

Given the rumored $6 billion price tag and the scant number of gaming companies that can realistically afford to come to the table with LVS, the company could look to a private equity firm if it’s intent on selling its Las Vegas business.

Bad Sign for Vegas?

Rumors about the fate of Sands’ Las Vegas assets sparked reaction that exploring such sales is negative commentary on Sin City’s recovery trajectory.

For its part, the company is consistent in its view that Macau and Singapore will bounce back more rapidly than the US gaming mecca, with one LVS executive saying earlier this year Las Vegas is “a tough place to be” because of the coronavirus pandemic.

LVS shares are higher by 3.30 percent in Monday’s after-hours session, but previously traded up by as much as 12 percent.