MGM China reached an agreement MGM Resorts International (NYSE:MGM) to continue using one of the gaming industry’s most recognizable brands.
The Chinese entity is the Macau arm of the Las Vegas-based gaming behemoth and operates MGM Cotai and MGM Macau in the world’s largest casino center. The news arrives on the heels of Macau extending concessionaires’ gaming permits through the end of 2022.
Following the further extension of the Sub-Concession pursuant to the SubConcession Further Extension Contract and in order to align the expiry dates of the Branding Agreement with that of the further extended Sub-Concession, the Company and the respective Counterparties have entered into the Second Renewed Branding Agreement on June 26, 2022 to replace and renew the First Renewed Branding Agreement,” according to a statement issued by MGM China.
The Bellagio operator owns nearly 56% of the Macau business while Pansy Ho, co-chairperson at MGM China Holdings, is the second-largest shareholder at 22.49%. She is the eldest daughter of Macau gaming scion Stanley Ho. MGM and Ho are equal holders in an entity known as MGM Branding
Expected, But Important Nonetheless
The initial agreement commenced in 2011 and was slated to lapse in 2020, but it was extended through June 2022 in 2019.
Though an expected, perfunctory action, renewing the branding accord is important for both MGM and its Macau subsidiary. In the case of the latter, it leverages one of the most ubiquitous brands in the gaming industry to lure patrons to its two integrated resorts.
On the other hand, MGM Resorts International can capitalize on the Macau relationship to, in normal operating environments, bring wealthy Chinese gamblers to the operator’s Las Vegas Strip venues, such as the Bellagio, Cosmopolitan and MGM Grand. There are also financial implications to the renewal of the branding pact.
“As one or more of the applicable percentage ratios (other than the profits ratio) under Rule 14.07 of the Listing Rules in respect of the monetary cap for the period from June 26, 2022 to December 31, 2022 under the Second Renewed Branding Agreement is more than 0.1% but less than 5%, such continuing connected transaction is subject to reporting, announcement and annual review requirements but is exempt from independent shareholders’ approval requirements under Chapter 14A of the Listing Rules,” added MGM China in the statement.
MGM Brand Deal Particulars
Under the terms of the agreement, MGM China has rights to use the MGM and MGM Grand brands as well as the famous MGM lion as well as “other MGM-related service marks, trademarks, registrations and domain names.”
To be sure, MGM is compensated in the agreement. In the first quarter of this year, the China unit paid the US parent $4.7 million for its brand after shelling out more than $21 million last year for the privilege.
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