PAGCOR Casino Privatization: Staffing Mandates Could Lower Valuation

The landscape of the Philippine gambling industry is on the verge of a major transformation as the Philippine Amusement and Gaming Corp (PAGCOR) prepares to divest its operating arm. The state-controlled Casino Filipino chain, consisting of approximately 40 branches and satellite venues, is slated for privatization. However, a new legal analysis from the Philippine law firm Geronimo Law indicates that the terms regarding existing staff could be a dealbreaker for many investors. Specifically, if the government mandates that buyers must retain current employees, the valuation of the casinos is expected to drop significantly.

The core of the issue lies in the structure of the deal. Because the transaction is being handled as an asset sale rather than a share sale, there is no automatic legal transfer of personnel. In an asset sale, the seller usually terminates the employment, and any claims or liabilities remain with the seller—in this case, PAGCOR. Potential buyers are expected to be highly selective, focusing on skilled roles such as surveillance officers, slot technicians, and experienced dealers, while resisting the absorption of the entire workforce. For the government, this creates a social and financial dilemma as they try to balance high sale proceeds with the welfare of civil servants.

Numbers and Facts

PAGCOR Chairman and CEO Alejandro Tengco has expressed hope that the privatization process can be completed by the end of 2026. This timeline is subject to the review of the Governance Commission for Government-Owned or -Controlled Corporations (GCG) and the final approval of the President. The legal study by Geronimo Law, first highlighted by the Manila Bulletin, outlines three distinct outcomes for the current staff: redeployment within the agency, employment by the new private owner, or separation with retirement benefits.

"Any obligation for winning bidders to absorb part of the affected workforce would arise only through the bidding terms and the asset purchase agreement, rather than through existing labor law." - Geronimo Law, legal analysis report

The report also notes that transferred workers would essentially be starting from scratch. Their length of service under the government would not automatically carry over to the private company unless specifically stipulated in the purchase agreement. If these conditions are forced into the contract, bidders will almost certainly adjust their offers downward to compensate for the added labor costs and risks.

Background

The move to privatize is intended to remove the conflict of interest inherent in PAGCOR's dual role as both the industry regulator and a casino operator. By shedding its operational side, PAGCOR aims to become a pure regulatory body, similar to international standards. However, the transition is complicated by the fact that the casino employees are civil servants. Any reduction in headcount must strictly follow civil service rules pertaining to government reorganization. While trained gaming personnel are currently in short supply in the region, which might encourage some hiring by new owners, the mandatory nature of such a requirement remains the primary point of contention.

Why it matters for German players

While this privatization occurs half a world away, it serves as a reminder of the importance of clear regulatory frameworks. In Germany, the GlüStV 2021 ensures that operators are strictly monitored by the GGL. German players should always check the official whitelist to ensure they are playing at a site that enforces the 1,000 Euro monthly deposit limit and the LUGAS verification system. Unlike the current situation in the Philippines where state and private interests are being untangled, the German market has a clear separation between the regulator and private providers. Playing at GGL-licensed casinos ensures that features like the five-second rule and the one-Euro spin limit are enforced for player protection, something not guaranteed at Curacao or MGA-licensed sites that might be influenced by such global market shifts.

What it means for GGL-licensed casinos

For operators within the German jurisdiction, the PAGCOR sale illustrates how labor laws and government structure can impact market entry for large international groups. If the Philippine privatization leads to more efficient, private-led gaming groups in Asia, these entities might seek to expand their footprint into established European markets like Germany. GGL-licensed operators must remain vigilant and maintain high standards of compliance to compete with these global players. The transparency of the German regulatory system remains its greatest strength, offering a stable environment compared to the fluid legal situations currently observed in emerging markets like the Philippines.