SINGAPORE (Reuters) - Malaysia's Genting group and an alliance led by U.S. gaming firm Kerzner International have emerged as the two favorites to win Singapore's second casino project as yet another rival pulled out, citing costs.

Harrah's Entertainment Inc., the world's biggest casino operator by revenue, dropped out of the running for the multi-billion dollar project on Friday, just days before the final bidding deadline on Tuesday.
The firm, which had teamed up with Singapore developer Keppel Land to bid for a 30-year license to run a casino on the resort island of Sentosa, said it would not be able to meet its financial objectives if it went ahead with the project.

"Regrettably, we determined it would not be possible to deliver a development on the scale we envisioned while meeting our financial objectives for this project," Harrah's spokeswoman Jacqueline Peterson told Reuters.

The firm, which does not yet have a gambling license in Asia, the world's fastest-growing gaming market, said earlier this week that it was reviewing its Singapore bid after becoming the target of a buyout offer from two U.S. private equity firms.

But Peterson said the decision to pull out of the race was entirely unrelated to the surprise buyout offer.

The Harrah's-led consortium is the second bidder to withdraw from the race; South Africa's top casino operator Sun International pulled out in June, saying the project would be too expensive.

Singapore scrapped a ban on casinos last year, and decided to invite bids for two gaming resorts in a bid to boost tourism.

The first casino initially attracted 12 interested parties, but the field was whittled down to just four consortia after Australia's Publishing & Broadcasting and South Africa's Peermont Global dropped out citing project costs.

Las Vegas Sands won the first license in May after it promised to spend more than US$3.2 billion on the landmark waterfront project.

FEWER SUITORS

The second casino has attracted a fewer suitors, even though the total costs are expected to be lower. Singapore has set a S$605 million ($382.4 million) price tag for the 49-hectare site.

The amount of capital that each bidder would be willing to commit would be reflective of their individual expectations for returns, said Jonathan Galaviz of Globalysis, a Las Vegas-based consultancy focused on Asia's tourism sector.

"Singapore will still receive high quality bids, which would ultimately achieve the goal of generating tourism for the country," he said.

Genting, which is bidding through its two affiliates Genting International and cruise operator Star Cruises Ltd., is widely seen as the frontrunner, given its tie-up with theme parks giant Universal Studios.

"The bidders have been tight-lipped about their proposals, but a lot of people have already made up their minds who the winner will be," Merrill Lynch analyst Sean Monaghan said, who thinks Genting has the strongest chance of winning.

The Malaysian firm has also hired U.S. architect Michael Graves, responsible for the International Finance Corp building in Washington D.C. and for Disney's headquarters in California.

Bahamas-based Kerzner, which has teamed up with Southeast Asia's largest developer, CapitaLand, has hired Frank Gehry, who designed the Guggenheim Museum in Bilbao.

Kerzner, which built a resort in the Bahamas based on the legendary lost city of Atlantis, has not said how it proposes to boost tourism other than promising a "revolutionary" project.

Local media have reported that the third bidder, privately held Las Vegas casino developer Eighth Wonder, is trying to replace its partner Isle of Capri Casinos Inc. with Australia's Publishing & Broadcasting to run the casino.

Eighth Wonder founder and head Mark Advent declined to comment, but a source close to the company said Mississippi-based Isle of Capri remains an equity partner in the bid.

Copyright 2006 Reuters