Studio City’s October IPO event is being viewed as a positive event for Melco Resorts, according to a note from Bernstein released on Tuesday.
Bernstein said it views the IPO of Studio City as value accretive to Melco, setting the stage for a potential acquisition of the outstanding minority interest by Melco in the future.
“The IPO effectively reduced net debt at MSC, while MLCO maintained majority ownership and bought into MSC with inexpensive debt,” explained Bernstein in the note.
“ The transaction provides for New Cotai a step toward monetizing its interest in Studio City and a potential path towards a future MLCO acquisition of Studio City. If Melco were to eventually buy out the minority interest in Melco, the IPO, and public market trading price also help set a price threshold,” it added.
Studio City was listed on the New York Stock Exchange under MSC on October 18. 2018. The company first announced plans to spin off its movie-themed integrated resort as early as August 2017.
The company raised a total of US$413 million in gross proceeds from the offer, with a final offer price of US$12.50 per ADS.
Upon closing of the Global Offering, Melco said that its interest in Studio City will be diluted from 60 to 57.3 percent but will remain as Studio City’s majority shareholder.