Stanley Ho, the Macau casino mogul, has just paid $330,000 for a giant white truffle. Genting, the Malaysian gaming group, has spent £30m or £40m on a 10 per cent stake in Rank, the British casino and bingo company. One was an act of charity; the other was not. But who made the better bet?
In favour of Mr Ho’s purchase, he has acquired worldwide publicity for his soon-to-be-floated gaming company, a place in the record books (at least until the next time a monster fungus is auctioned), and an asset that, while fast depreciating in value, can be sliced up into smaller pieces to be sold or consumed at will. Genting, by contrast, seems to have invested in an asset that, at least for now, looks hard to break up and even tougher to sell.
That doesn’t mean the Malaysian group’s gamble is a rash one. Before its recent streamlining, Rank was the owner of everything from Britain’s famous Pinewood film studios to the Hard Rock Café chain. But Genting has bought an option over its future at a low-point in the group’s fortunes. Bingo (gaming for Britain’s non-truffle-eating classes) and casinos have both been hit by national bans on smoking. Government policy on expanding the number of licences for small and medium-sized casinos is in limbo.
The group’s casino licences do have value, even if bingo would be hard to sell in the current climate. Genting could try to combine them with the casinos it acquired when buying Britain’s Stanley Leisure last year, or sell its option to US, Asian or UK competitors. Defensive or not, the investment should help prop up Rank stock, which is good news for shareholders. Having completed the restructuring, however, Rank’s management is virtually powerless to determine the group’s destiny. Only a truffle has less influence over who devours it.