Kok Thay sells loss-making Empire Resorts stake to Genting Msia

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KUALA LUMPUR (Aug 6): Tan Sri Lim Kok Thay, via Kien Huat Realty III Ltd, is selling 46% of the common stock in Nasdaq-listed gaming and entertainment company, Empire Resorts Inc, to Genting Malaysia Bhd (GenM) for US$128.6 million cash or RM538.8 million.

The related party transaction is priced at US$9.74 per share of the common stock, some 13.2 million in all, which represent about 35% of the outstanding voting power of Empire on a fully diluted basis, after conversion of all outstanding preferred stocks into common stocks.

Kien Huat currently controls 84% stake in Empire, which has been loss making for the past two decades, according to Bloomberg. Empire posted a net loss of US$155.36 million for the financial year ended Dec 31, 2018 — the biggest ever loss. 

Following the proposed share acquisition, GenM and Kien Huat will join hands to take Empire private at the same consideration of US$9.74 per share of common stock.

GenM, in a stock exchange filing today, said it has inked a binding term sheet with Kien Huat for its wholly-owned Genting (USA) Ltd to undertake the acquisition, which GenM said will be funded by internal funds. As at March 31, 2019, GenM's cash and cash equivalents stood at RM7.92 billion, while its debts was at RM9.68 billion.

Empire owns and operates Resorts World Catskills (RWC), a casino resort situated on a 1,700-acre site in New York. 

Empire also owns and operates Monticello Casino and Raceway (MCR), which began operations in 1958 in Monticello, New York, and features an electronic gaming machine and harness horse-racing facility. The EGM operations and food and beverage service at MCR ceased in April this year and was consolidated with RWC. Empire also has a sportsbook and digital gaming collaboration with an affiliate of Bet365 Group Ltd, a British online gaming company.

GenM said the proposed acquisition is subject to, among others, receipt of regulatory approvals, including approval by the New York State Gaming Commission (NYSGC) and satisfaction of applicable regulatory requirements.

It expects the proposed acquisition to be completed in the third or fourth quarter of this year. “If a merger agreement with Empire is entered into and such conditions precedent are satisfied or waived, we anticipate that the proposed merger could be completed by the fourth quarter of 2019,” GenM added.

GenM does not expect the proposed exercise to have any material effect on its consolidated earnings and earnings per share for the financial year ending Dec 31, 2019 (FY19).

The casino operator said the rationale of the stake acquisition is to better position the Resorts World brand in the North-Eastern US gaming market, through more effective cross marketing with Resorts World Casino New York City.