LET Group Holdings is set to convene a shareholders meeting in August for the purpose of selling the Tigre de Cristal resort located in Russia. The company's apprehension regarding sanctions imposed on the Russian Federation amid the ongoing conflict in Ukraine is evident. Due to these economic restrictions, LET finds itself unable to effectively market its investment company, which will result in a loss of anticipated profits—an outcome that may only be the tip of the iceberg. Considering all potential risks, it is possible that LET's operations could face sanctions from other countries due to its association with Russia.
For context, LET Group Holdings is a prominent entity in the Asian gambling industry, engaging in various projects throughout the Asia-Pacific region, including the establishment of integrated resorts in Vietnam, the Philippines, and Cambodia. The company previously invested in the development of Tigre de Cristal in the Primorsky Territory; however, this investment is now viewed as unprofitable.
In 2015, Tigre de Cristal made history as the first casino resort in Russia's Primorsky Integrated Entertainment Zone (PIEZ), situated near Vladivostok. Developed by Melco Resorts and Entertainment at a cost of €158.6 million (£133.2 million/$172 million), the resort was intended to be the inaugural establishment in a planned cluster of 11 casinos, with aspirations to create a Russian version of Las Vegas in the Far East by 2023.
But with the flagship resort, things didn't go according to plan from the very beginning. Back in 2017, Melco founder and chairman Lawrence Ho gave up his majority stake.
Pandemic and other troubles
Then new problems appeared - literally one after another. In 2019, due to the coronavirus pandemic, the casino area was temporarily closed, which hindered the growth of the Russian land-based gambling zone. And these days, longer-term plans are undermined by the military conflict between Russia and Ukraine.
Now LET Group Holdings and subsidiary Summit Ascent Holdings want to sell Tigre de Cristal at a favourable price.
In January 2024, LET was close to concluding a deal to sell 100% of the shares of casino operator G1 Entertainment to the Russian company Far Eastern Active for €107. Because of this plan, board members began leaving Summit Ascent. Five of the six left in protest at the proposed sale, leaving only chairman Andrew Law. Then, in February of the same year, the potential buyer backed out of the deal.
Law will chair an extraordinary general meeting (EGM) on August 15, 2024 to develop a new strategy for the sale of the resort.
EU and US sanctions may deprive LET of all assets
According to the Council on Foreign Relations, in February 2022, the United States “imposed a wide range of sanctions” against the Russian Federation to isolate the country and reduce its economic and military influence.
Since then, the US, UK, European Union and several other countries, including Australia, Canada and Japan, have imposed more than 16,500 sanctions against the Russian bear. Among them: restrictions on imports and exports, a freeze of €328.5 billion in foreign exchange reserves and logistics suspensions.
LET shareholders are understandably keen to get rid of the company's Russian assets. They complain that retaining casino operator G1 Entertainment could "bring too much uncertainty and risk." According to the company’s management, there is a high probability of facing sanctions “in relation to its assets or LET Group and its subsidiaries” from states opposing the military conflict between the Russian Federation and Ukraine.
Casino construction frozen: who will be the investor?
In addition to Tigre de Cristal, another casino resort is currently open in the PIEZ - Shambala. IR debuted in 2020. The second phase of construction at both resorts has been suspended.
As of fall 2023, a third resort project was still in development by construction and project management company Asia-Invest Group. But plans by Cambodian operator NagaCorp to join a casino cluster in Primorye were cancelled after the invasion of Ukraine. Accordingly, there are no planned funds for construction. Today, only Russian companies can implement the idea of a Russian Las Vegas if they consider the project sufficiently profitable and promising.
