Entertainment Gaming Asia Inc. (NYSE Amex: EGT) (“Entertainment Gaming Asia” or “the Company”), a leading provider of electronic gaming machines on a participation basis to the Pan-Asian gaming industry, today announced it entered into an agreement (the “Agreement”) to increase its revenue sharing rights in San Pedro VIP Club, one of the Company’s best performing venues in its Philippine gaming participation operations. This Agreement, which furthers the Company’s strategy to improve returns and focus its assets on the highest-potential venues in the market, increases its revenue share of this venue’s net win to 35% and its control over the promotion and marketing strategies.
San Pedro VIP Club, located in the popular suburban district of San Pedro, Laguna, approximately twenty minutes from Manila, is one of the Company’s most promising venues under participation contract in the Philippines. The Company currently has approximately 180 electronic gaming machine seats in operation at San Pedro VIP Club with average daily net win per machine of approximately $70-80.
As in all other cases of the Company’s existing participation business in the Philippines, San Pedro VIP Club is operated by the government operator, Philippine Amusement and Gaming Corporation (PAGCOR), which entered into a machine lease contract with a company (the “Proponent”) which possesses the premises of the club (the “PAGCOR Contract”). The Proponent in turn entered into an agreement with the Company to lease electronic gaming machines to the venue (the “Agreement of Lease”). Pursuant to the terms of the PAGCOR Contract and the Agreement of Lease, the net win after gaming tax of the machines at San Pedro VIP Club was to be shared amongst PAGCOR, the Proponent, and the Company in the ratio of 65%, 18%, and 17%, respectively.
Under the terms of the Agreement announced today, Entertainment Gaming Asia will take over the role of the Proponent and will work directly with PAGCOR. The Company’s revenue share will increase from 17% to 35% and PAGCOR will maintain its 65% share. The Company will also incur certain of the venue’s operating expenses, which will be recorded in its cost of gaming operations. These operating expenses mainly comprise costs related to property rental, marketing, and equipment maintenance. The closing of the Agreement will be subject to the fulfillment of various conditions, which include PAGCOR’s consent and agreement to extend the PAGCOR Contract with the Company until mid 2016. Upon closing, the Agreement will be retroactively effective as of August 1, 2011.
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