Casino operator Genting Malaysia Bhd says it has signed a binding term sheet to acquire a stake in loss-making Empire Resorts Inc, owner and operator of Resorts World Catskills, about 140 kilometres (90 miles) from New York City, in the United States. Empire Resorts is 88.7 percent owned by Kien Huat Realty III Ltd, the family trust of Lim Kok Thay, the controlling shareholder of the Genting group.
In a Tuesday filing, Genting Malaysia said it would acquire 13.2 million shares of the common stock of Empire Resorts held by Kien Huat Realty – which represent an approximately 35-percent stake in Empire Resorts – at an aggregate cash consideration of nearly US$128.6 million. The deal will be done via Genting Malaysia’s subsidiary, Genting (USA) Ltd.
Genting Malaysia’s unit and Kien Huat Realty have also jointly submitted a proposal to Empire Resorts to acquire the outstanding shares held by minority shareholders, for US$9.74 a share. The deal would lead to the privatisation of Nasdaq-listed Empire Resorts.
Once the deal is completed, Genting USA and Kien Huat Realty would form a joint venture, with Genting USA controlling a 49 percent membership interest in the venture, according to Tuesday’s filing.
Kien Huat Realty had said in a July letter to the board of Empire Resorts, that the latter company was at a “critical juncture”, being “unable to become financially self-sustaining” and unable to overcome the challenges it faced as a public company.
Maybank Investment Bank Bhd said in a Wednesday note that Empire Resorts’ current fundamentals were “wanting” but with the new arrangement, “we gather the Lim family may be more sanguine on its outlook”.
Genting Malaysia said the acquisition will be funded by “internally generated funds”. The proposed acquisition is subject to regulatory approvals and satisfaction of applicable regulatory requirements, the company added.
Maybank’s analyst Samuel Yin Shao Yang said the brokerage’s own calculations indicated “that both companies will need to pay a combined US$53.6 million … to take Empire private, of which Genting Malaysia will bear 49 percent.”
Empire Resorts has been loss making for several years. The company posted a net loss of nearly US$138.8 million for the financial year ended December 31, 2018.
Resorts World Catskills (pictured) commenced operations on February 8, 2018 and features a 332 all-suite hotel, 1,600 slot machines and over 150 live table games, according to company information.
Genting Malaysia currently has no involvement in the management of Resorts World Catskills.
Empire Resorts also owns the Monticello Casino and Raceway, which features horse racing operations, and until April also offered slot machines and electronic tables. The operation of electronic gaming machines ceased on April 23, 2019 and was consolidated with Resorts World Catskills.
Genting Malaysia said in Tuesday’s filing that via the acquisition of the stake in Empire Resorts it expects to “better position” the Resorts World brand in the northeastern United States gaming market “through more effective cross marketing” with another property it already operates there, the Resorts World Casino New York City (RWNYC).
The casino operator said additionally that it plans to cut costs “by eliminating duplicative costs at Empire and RWNYC, including the elimination of public company costs at Empire.”
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Ministry of Health of Singapore