February 20, 2012 2:54 pm

Banks sounding Galaxy Entertainment block sale from Permira

This article is provided to FT.com readers by dealReporter—a news service focused on providing insightful intelligence on event driven situations to investors. www.dealreporter.com

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Investment banks have been sounding out investor interest on a block of Galaxy Entertainment [27:HK] shares owned by private equity group Permira, sources familiar with the matter told dealReporter.

The sale may go out at about the same level as the last time Permira sold the company shares in September. Permira raised USD 614m from selling a 6.14% stake in Galaxy at HKD 17.70 apiece.

Galaxy said at the time Premira still held 528m shares, or a 12.7% stake in the company. The sources said Permira may on this transaction sell down its entire holding. That would raise HKD 9.34bn (USD 1.2bn) at the price of the previous sale. That is an about 5.5% discount to the current HKD 18.74 share price.

The previous sale was considered a debacle as the shares tanked immediately after the sale, but most investors see a sale now as much more likely to perform well on the back of a surge in global stock markets.

The company’s shares are up 31.6% this year while the Hang Seng Index is up 15.1%.

Potential investors also see more upside for Galaxy as the company still has room to expand in Macau’s rapidly growing gaming market. Most other firms are expected to see muted or no expansion over the near to medium term, as they have completed planned expansions or were retrenching.

Hong Kong tycoon and Galaxy controlling shareholder Lui Che Woo saw Permira’s remaining stake as an overhang on the company’s share price performance, said one of the sources.

A mandate hasn’t been awarded but banks including Morgan Stanley and Credit Suisse are pitching for a lead role in any sale, one of the sources said.

Execution of the sale could come as late as next month after Galaxy reports earnings.

Spokespersons at Permira and Galaxy were not available to comment.

Permira acquired a 20% stake in Galaxy for HKD 6.5bn (USD 840m) in 2007 at HKD 8.42 a share.

Galaxy, one of the key casino operators in Macau, was the second largest operator in the former Portuguese enclave with 19.5% market share at the end of 2011, according to a Macquarie report. SJM [880:HK], the casino operator owned by Stanley Ho, was the largest operator in Macau with 27% market share.

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