Casino group Wynn Resorts Ltd has agreed to pay a total of US$2.4 billion to settle a stock redemption dispute with Aruze USA Inc and the latter’s parent company, Universal Entertainment Corp. The Japanese conglomerate was founded by gaming entrepreneur Kazuo Okada (pictured).
Wynn Resorts – the parent of Macau casino operator Wynn Macau Ltd – pledged to pay US$1.94 billion for the Wynn Resorts stock, and a further approximately US$0.5 billion, to end litigation regarding interest money allegedly as a result of the 2012 forced redemption.
The settlement announced by Wynn Resorts in a Thursday press release could pave the way for resolution of another dispute between Steve Wynn, the former chairman and chief executive of Wynn Resorts, and his former wife Elaine Wynn, which had threatened to disrupt the ownership structure of the casino group.
The Aruze USA dispute dates back to 2012, when Mr Okada was ejected from Wynn Resorts’ board after the casino firm claimed he was “unsuitable” and a risk to its licences. Mr Okada was at that time Wynn Resorts’ biggest single shareholder, holding the stake via Aruze USA, a subsidiary of Universal Entertainment.
The Wynn Resorts’ board had voted to cancel Mr Okada’s 20 percent stake in the group amounting to 24.5 million shares and issue him with a promissory note for circa US$1.9 billion. The note was in effect a 30 percent discount on the then US$2.77 billion valuation of his stake. Mr Okada had always denied any wrongdoing.
Under the fresh agreement disclosed on Thursday, Wynn Resorts is to pay to the Aruze USA side, on March 31, the nearly US$1.94 billion principal amount of the redemption note, plus on the same date, nearly US$463.6 million “to settle allegations surrounding the interest rate on the redemption note”.
The settlement is an effective rate of US$78 per share held by Aruze USA, at 6 percent interest over the previous six years, according to the filing.
In a February filing to Jasdaq, Universal Entertainment said that as of October 31, 2017 – and according to what it described as an “expert report” – it should be entitled to approximately US$4.5 billion in damages “for the invalid redemption” of the Wynn Resorts shares.
Wynn Resorts’ Thursday statement nonetheless said: “The settlement provides for the parties to the agreement to dismiss all litigation between Universal Entertainment and Aruze USA, and Wynn Resorts, its then-directors and executives with respect to the redemption. The settlement agreement also puts an end to claims brought by Universal Entertainment and Aruze USA against Wynn Macau in Macau.”
The release added that in return: “Aruze USA, will not consider itself a party to the amended and restated stockholders’ agreement among Universal Entertainment’s subsidiary Aruze USA, Steve Wynn and Elaine P. Wynn, nor will it assert any claims or rights under the stockholders agreement.”
Commenting on the settlement, analysts of brokerage Deutsche Bank Securities Inc said that in their view “the single biggest financial overhang [on Wynn Resorts] … was resolved tonight”.
“The settlement marks the end of the six-year legal battle over the redemption of Mr Okada’s stake and ends all litigation between the parties. We view the settlement as a meaningful positive, as it provides clarity and removes an overhang that has been difficult for many to assess,” wrote analysts Carlo Santarelli and Danny Valoy in a Thursday note.
Wynn Resorts’ 2017 annual report, filed on February 28, noted Ms Wynn had ongoing litigation seeking to void that stockholders’ agreement to vote her stock with Mr Wynn.
That move “if successful, could increase the possibility of a change in control occurring for purposes of certain Wynn Las Vegas LLC debt documents,” noted the annual report.
Subsequent to his departure from Wynn Resorts in February amid allegations of sexual misconduct, Mr Wynn had agreed to declare the 2010 stockholder agreement invalid. Mr Wynn was also chairman and chief executive of Wynn Macau Ltd until February 6.
But an attempt by Mr Wynn’s side to head off Ms Wynn’s litigation – on the grounds Mr Wynn was no longer holding her to the 2010 agreement – failed when on March 2 a Nevada judge ruled the matter was “too intertwined” with other issues, including the forced redemption of Mr Okada’s shares.
According to Wynn Resorts’ March 2017 proxy statement filed with the U.S. Securities and Exchange Commission, as of March 1, 2017 Ms Wynn held 9.4 percent of the firm, while Mr Wynn held 11.8 percent.
According to a Wynn Resorts filing this year, Mr Wynn’s holding remained at 11.8 percent.
(Updated at 2.28pm, March 9)
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