SunCity Exec Involved in $1bn Cuban Cigar Deal
A group of investors fronted by a Hong Kong businessman who sits on the board of some of Asia’s biggest gambling operators is buying Cohiba. The deal has come to public attention following the official fillings made with the Hong Kong authorities. Typical of any deal involving investors with relationships in Cuba and the United States, it has been shrouded in secrecy.
Buyers of the world-renowned tobacco firm Imperial Brands plc are hidden by a smoky cloak of secrecy. Yet a consortium of investors is being led and fronted by a businessman in Hong Kong who helps run some of the biggest gaming operations in Asia.
The business began unfolding last month as Imperial agreed to offload their premium cigar businesses – including the world-renowned Cohiba, Montecristo, and Romeo y Julieta – for $1.1bn to Allied Cigar Corp. At the time of the sale, a spokesman for Imperial refused to give away any details of the new ownership, adding to the mystery and interest in this transaction. They did offer some parting words, though, saying that the purchasing party is “the right long-term owners” for the cigar company.
The true acquirers have been obscured by layers of holding companies, but what we do know from corporate registry filings posted in Hong Kong on March 10th is that the purchasing firm has cited one its board members as Chiu-King Yan, a member of the SunCity gambling group board.
Who Are The New Investors?
The firm that has purchased the ownership of the brand cluster under the Imperial parent company is Allied Cigar. This move is unprecedented in a number of ways, but most specifically relating to the Chief Financial Officer of SunCity Group Holdings Ltd. is named on the official papers submitted to the regulatory commission.
Chiu-King Yan is incredibly well-connected in Macau, where his firm runs one of the largest casino complexes throughout the entire city, trading far beyond the financial clout of its competitors. Besides the direct involvement of the company CFO, the papers don’t highlight any involvement from SunCity in the Imperial Brands transaction.
When pressed for comment by a Bloomberg journalist, Imperial Brands refused to answer, but SunCity commented,
We are not associated with Allied Cigar or Imperial Brands. Any transaction that has taken place is not related to SunCity Group or any of its affiliated businesses.–Spokesperson, SunCity
It is not uncommon for the true identities of entities involved in a business transaction to be obscured by complex corporate structures, but in this case, with a business acquisition in the region of $1.1bn it is somewhat strange. In fact, for a transaction this large it is almost impossible to maintain such a high level of secrecy. The connection with Cuba, which has a 50% stake in the distribution rights of the brands under the control of Imperial only adds to the mystery. Cuba has been economically isolated by the U.S. for many years, and it has become nearly impossible for companies to conduct business in both countries.
The deal makes sense in the context of SunCity’s recent expansion ambitions, which has been plotting to break out of the Macau gambling hub for several years. Under the chairmanship of Alvin Chau, the SunCity Group has been diversifying its portfolio and making acquisitions spanning entertainment, leisure, and travel.
Following the completion of this deal, both parties are looking ahead to the future and better financial prosperity despite the Macau casinos losing $3m daily. Imperial has already stated that the proceeds from this transaction will go towards servicing debts and general liabilities reduction, and they hope to have the transaction completed by the third quarter. SunCity has also benefited, making above-market returns in their share price, which saw a 3.2% increase whilst the market index slipped by 1.6%.