The largest shareholder in Cambodian casino firm NagaCorp Ltd, its chief executive Chen Lip Keong, is to gain majority control of the company via the exercising of conversion rights regarding two groups of convertible bonds.
The operation was approved on Friday during a company extraordinary general meeting, the firm said in a filing. It was approved by 91.1 percent of the shareholders represented at the meeting.
Following the conversion exercise, the stake of Mr Chen and related parties in NagaCorp’s entire issued share capital will increase from 39.98 percent to 65.42 percent, the Hong Kong-listed firm stated. The process is expected to be completed by August 18.
NagaCorp operates NagaWorld (pictured), arguably Cambodia’s best-known casino resort among international commentators and the public. The property, authorised to serve only nationals of foreign countries, is the only legal casino within a 200-kilometre (124-mile) radius of the Southeast Asian nation’s capital, Phnom Penh.
The convertible bonds being exercised relate to two different sets. One of the sets refers to a 2011 deal for the acquisition by NagaCorp of TSC Inc, a firm previously controlled by Mr Chen; the sale was only completed last year. TSC is the company holding the rights for the TSCLK Complex, a gaming project across the road from NagaWorld. “The TSCLK Complex (also known as Naga2) is undergoing fit-out and is expected to be operational in the fourth quarter of 2017,” NagaCorp said in a July filing.
The second set of convertible bonds relates to a different 2011 deal between Mr Chen and NagaCorp regarding the acquisition by the latter of Citi Walk Inc. City Walk is the holding company for the NagaCity Walk project. The scheme, an underground shopping complex that had a soft opening in mid-August last year, will connect Naga2 to NagaWorld.
The conversion of the bonds was subject to the granting to Mr Chen of a waiver by the Hong Kong Securities and Futures Commission regarding the obligation to make a mandatory general offer for all the issued share of NagaCorp not already under his control. Friday’s filing confirmed that the waiver had been granted, as stated in an August 3 letter from the Securities and Futures Commission to NagaCorp.
According to the Hong Kong Code on Takeovers and Mergers and Share Buy-backs, a mandatory offer is required when “any person holds not less than 30 percent, but not more than 50 percent, of the voting rights of a company and that person acquires additional voting rights and such acquisition has the effect of increasing that person’s holding of voting rights of the company by more than 2 percent from the lowest percentage holding of that person in the 12 month period ending on and inclusive of the date of the relevant acquisition”.
Brokerage Union Gaming Securities Asia Ltd said in a June note that a concurrent conversion of the bonds of the TSCLK Complex and the NagaCity Walk instead of a staggered conversion would have a “significant positive effect on [NagaCorp's] valuation of nearly one full multiple turn on 2018 EBITDA [earnings before interest, taxation, depreciation and amortisation]”.
If opting for a staggered conversion, Mr Chen’s stake in the company would eventually have increased to 69.83 percent upon the exercise of the two bond sets.
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