What board would fire a CEO just days before announcing that he had taken their company from second-quarter earnings of US$176m a year ago to just under US$300m in 2Q this year? No prizes for guessing. Yes, it’s true. Las Vegas Sands Corp. president Mike Leven fired Sands China CEO Steve Jacobs this morning, ahead of the Sunday arrival of chairman Sheldon Adelson for next week’s board meeting, at which it will likely approve a record adjusted property ebitda number of between US$280-290m, based on analysts’ consensus forecasts.
Jacobs’s sin, we have been led to understand, is that he believed the Hong Kong-listed subsidiary of LVS should have been operated in the best interests of all of its shareholders, not just the majority shareholders. Which meant, in other words, the Sands China board and executive team should have been able to make decisions that sometimes went against the wishes of the Las Vegas-based parent company’s leadership. How and why he thought this might have been a sustainable modus operandi, given the reputation of his chairman, is not for us to ponder here. The point is it was never going to work and once this path had been trod upon, the destination was inevitable. Sheldon Adelson owns the majority share of the company and we live in a capitalist society based on the rule of law. Just ask Bill Weidner what that means.
To be sure, Jacobs had his faults during the year he ran Venetian Macao Ltd, which became Sands China Ltd with its December 2009 listing. He wasn’t the most diplomatic of sorts, despite the wide grin, the bear hug and the death-grip handshake. He created a fair amount of ill-will locally with his aggressive style as he slashed jobs by the thousands and carved huge savings out of the company’s balance sheet. But that was his mission, as set by his masters, and he did it with aplomb. Sands China, which includes the Venetian, Plaza and Sands, went on his watch from being a lumbering grizzly bear to being a pit-bull in the market. There must be few people on the planet who could have done what Jacobs did there over the past year. For the first three quarters he focused on slashing fat. Over the past quarter, he has being working on toning his company’s revenue muscle and the results that come out next week will, we believe, show that he can be both a cutter and a builder. Premium-direct revenues, we understand, are now top of the market. Mass revenues are still way tops. The result? Ebitda numbers that no one can come close to, despite those monthly market-share numbers that show SJM with a 10-point lead in gross gaming revenue market share.
Who could possibly replace him? We understand that Irwin Siegel, a member of the LVS board, will step in temporarily while Leven conducts an executive search. We would have to assume that a local hire is out of the question, as the only person who could realistically step into this position at a moment’s notice has just finished unpacking his house in Australia, so he’s not likely to be getting on a plane this week. So it may take some time to find a replacement. The thing is, Jacobs ran Sands China so completely and utterly as an extension of himself that it’s hard to imagine how the place will function without him. He has a great executive team, no doubt. Kevin Clayton, Mark McWhinnie, Andrew Billany and Pete Wu could keep things ticking over while Jacobs was on holiday. But there is nobody on that team who could have stepped into the hot seat, even temporarily, if they had known he was not coming back from holiday. It is simply too hot a seat to sit in and they don’t make anywhere near enough money to do it.
The next-best person to Stephen Weaver would be his predecessor who now runs the Grand Lisboa, Frank McFadden, of course. But the man is still not even allowed to set foot on a Sands property, as far as we know. Would Adelson be humble enough to take him back and pay him a fortune, to boot? Doesn’t fit the character profile. So it might have to be another Jacobs-type MBA-toting larger-than-life personality shipped in from the US.
We wait with bated breath for the announcement.
Used with permission & copyright to IntelMacau
