Entertainment Gaming Asia Inc. has announced on October 23rd that the company has entered into an agreement to increase its revenue sharing rights in its Philippine gaming participation operations. The Entertainment Gaming Asia is a leading provider for electronic gaming equipment and it intends to increase its revenue sharing rights in one of its best performing venues in San Pedro VIP club, Philippines.
The agreement further states about the company’s strategy to improve focus on its assets and returns on the highest potential venues in the gaming market. It is now focusing to increase the revenue share of this venue in Philippines net win to 35 percent. The strategy is also to take control over the marketing as well as promotional campaigns and strategies.
Under the participation contract in the Philippines, San Pedro VIP Club proves to be the most promising venue as it is very popular, located in suburban district of San Pedro, Laguna. This place is approximately 20 minutes from Manila. In the San Pedro VIP Club, around 180 electronic gaming machines seats are in operation. The average daily win per machine is approximately $70 to $80, which makes total win on 180 machines as $12600 to $14400.
New Agreement, Increase in Revenue Share
The Entertainment Gaming Asia’s existing participation business in Philippines is operated by the Government operator PAGCOR, which entered into a machine lease contract with the “Proponent.” As per the terms of the PAGCOR contract and the Agreement of Lease, the net win after tax was to be shared among PAGCOR, the Proponent, and Entertainment Gaming Asia in the ratio of 65 percent, 18 percent, and 17percent, respectively.
But, under the terms of the contract signed on 23rd October, 2011, the Company will take over the role of the Proponent and will work with PAGCOR directly. Therefore, its revenue shares will increase from 17 percent to 35 percent and PAGCOR will maintain the share of 65 percent. In this process, Entertainment Gaming Asia will also incur some of the venue’s operating expenses. These operating expenses include property rental, equipment maintenance, and marketing.
Final Closing after Approval of Other Things
The final closing of this agreement will depend on some other things like PAGCOR’s consent and approval and agreement on the extension of the PAGCOR contract with the Company till the mid-2016. After fulfilling these conditions, the Agreement will be closed and it will be effective retroactively from August 1, 2011. In this process, the total consideration payable by the Entertainment Gaming Asia is around $1.3 billion, which will be funded by the internal cash resources of the company.
The CEO of Entertainment Gaming Asia, Clarence Chung, commented that the company is pleased to have the opportunity to work directly with PAGCOR. He also commented on the company’s strategy to improve the growth potential of their Philippines operations by focusing the resources on this promising market. With greater flexibility and control over operations and marketing, the Company intends to implement some initiatives based on customer service and loyalty programs.
The company hopes to strengthen its overall position in the Asian market by this investment and new agreement. This positions the company better to look forward to gaming expansion opportunities including their casino development plans in Indo-China region as well.