Hong Kong-listed Melco signed a 20-year agreement Tuesday with US gaming machine maker Shuffle Master under which Melco will take over distribution of the New York-listed firm's products in Asia. The two will also jointly open a research and development center in Macau to design Asia- geared gaming machines to be built in a new Melco factory in China.

Melco officials declined to forecast revenue benefits from the alliance, but its chairman and chief executive Lawrence Ho Yau-lung said results from the distributorship will be immediate.

ADVERTISEMENT

Shuffle Master's flagship product line is card shuffling machines, but the company has been expanding into table game development, roulette chip sorters, slot machines and electronic table games.

Shuffle Master chairman and chief executive Mark Yoseloff said Tuesday that checks with his existing customers turned up no reluctance to buy equipment from the prospective alliance, even though Melco is a competitor.

Already, Melco, through its Elixir unit, is providing technology consulting services to dominant Macau casino operator Sociedade de Jogos de Macau - owned by Ho's father, Stanley Ho Hung-sun - under a HK$70.5 million contract signed in December.

Lawrence Ho said last week he expected the relationship with SJM to continue even after Melco, through its joint venture with Publishing & Broadcasting, begins casino operations in competition with SJM next year.

Explaining the deal, Yoseloff said: "We can't sit in Las Vegas in the United States and know what will play well in the Asian market."

Yoseloff said Shuffle Master, which generated US$9.1 million (HK$70.9 million) in sales from the Asia-Pacific region last year, will continue to directly supply some Asian casinos, including the soon-to-open Wynn Macau, where it will supply most of the 500 tables. The company now has about 450 shuffling machines running in Macau.

The Melco deal is Shuffle Master's third in the region recently. It bought regional equipment supplier VIP Gaming Solutions last year and in March completed the US$108 million buyout of Stargames, an Australian games manufacturer with a large market share in Macau for its electronic baccarat tables and other products.

The new deal alliance will displace Kuala Lumpur-listed Dreamgate Corp, which has been distributing both Stargames and Shuffle Master products in Asia.

Gordon Yuen, chief executive of Elixir, put the initial investment in the R&D center at US$1 million but declined to estimate the cost of the Chinese factory.

Separately, Deutsche Bank analyst Karen Tang issued a report Tuesday estimating the full cost of Melco/PBL's City of Dreams casino resort at HK$9.56 billion. The two companies broke ground on the resort Monday, but have previously put the cost at HK$8 billion.