A Hong Kong-based hedge fund has sued the board of gaming equipment and lottery services provider Scientific Games Corp and that firm’s chairman, Ronald Perelman, alleging they have breached their fiduciary duty. Sylebra Capital Partners is one of the biggest shareholders in Scientific Games, having accumulated a 9.8-percent stake in the gaming manufacturer, according to a June filing.
The litigation was in response to a lawsuit filed in June by Scientific Games in Nevada, in the United States, attempting to force Sylebra to provide information relevant to suitability checks by Nevada’s gaming regulator. The gaming manufacturer mentioned in its lawsuit that Sylebra was being investigated by a number of gaming regulators in the U.S. and elsewhere, namely regarding its possible links with a Russia-based third party.
“Perelman and his hand-picked board have inflicted more than US$290 million in damages by spreading malicious and misleading claims about Sylebra,” said the hedge fund in a Thursday press release announcing the lawsuit. Sylebra filed the lawsuit on Wednesday with the United States District Court in Delaware. Sylebra also sued Scientific Games’ current chief executive Barry Cottle, and previous CEOs Kevin Sheehan and Gavin Isaacs.
It added: “Perelman’s goal is to force Sylebra out of Scientific Games by using unique provisions of the gaming company’s charter that would deem Sylebra an unsuitable investor. He could then forcibly redeem Sylebra’s shares at a deeply discounted price to further solidify control over Scientific Games.”
Susan Cartwright, Scientific Games’ vice president for corporate communications, said in an emailed statement to GGRAsia: “In response to Scientific Games’ efforts to ensure integrity and transparency, which is required by U.S. regulators, Sylebra has sued to distract from the basic and obvious fact – Sylebra has simply not provided plain vanilla information which would resolve this dispute as well as the lawsuit Scientific Games filed against Sylebra months ago.”
Mr Perelman controls – via direct and indirect holdings – slightly more than 39 percent of Scientific Games’ common shares. Since December, the executive – via his holdings – has spent more than US$17.5 million buying shares in the gaming manufacturer.
The investment fund alleged that Mr Perelman “is abusing his power as chairman,” helped by “a complicit board” that has “wasted significant company resources”, in efforts that Sylebra describes as “breaches of fiduciary duty”.
“Sylebra has been left with no choice but to seek a legal remedy for the losses inflicted by Perelman’s campaign,” said the firm.
Dan Gibson, Sylebra’s chief investment officer, was quoted in the release as saying: “Ron Perelman’s … goal is clear – to force Sylebra out of Scientific Games and confiscate our legitimate profits … This lawsuit aims to protect our investors and seek compensation for the losses inflicted on us.”
He added: “We are confident that a court of law will determine that Perelman and the board have breached fiduciary duty to strengthen control at the expense of Sylebra and other minority shareholders.”
(Updated at 9.30pm, Oct 26)
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