GGRAsia – Universal Ent seeks to end SPAC deal for Okada Manila listing

Universal Ent seeks to end SPAC deal for Okada Manila listing

Mar 20, 2023 Newsdesk Latest News, Philippines, Top of the deck

Japanese conglomerate Universal Entertainment Corp is denying the accusations made against the group in a suit by United States-listed 26 Capital Acquisition Corp regarding a deal that would involve the listing in the U.S. of the operator of the Okada Manila casino resort (pictured in a file photo) in the Philippine capital. The Universal Entertainment side is now seeking to have the deal with the 26 Capital entity – a special purpose acquisition company (SPAC) listed on the Nasdaq stock market in the U.S. – called off.

The case is being heard by a court in the U.S. state of Delaware.

In a document filed to the court earlier this month and seen by GGRAsia, Universal Entertainment subsidiaries UE Resorts International Inc and Tiger Resort, Leisure and Entertainment Inc, as well as two other units, stated that “the complaint paints the SPAC as an innocent jilted buyer left at the altar by the Universal Entertainment parties’ alleged failure to close”.

It adds: “But there is much more to the story here – a concerted and increasingly erratic campaign by the SPAC and its chief executive, Jason Ader, to pursue closing at all costs in pursuit of a windfall ‘promote.’”

In the document filed to court, the Universal Entertainment side states that the alleged campaign by the 26 Capital side had “involved an aggressive disregard for the U.S. securities laws, and a public relations strategy designed to mislead the SPAC’s investors and induce them to support the SPAC, in flagrant violation of the SPAC’s contractual obligation to refrain from public comment on the transaction without the Universal Entertainment parties’ prior notice and written approval.”

The alleged breaches, stated Universal Entertainment’s court filing, “aimed at painting a falsely rosy picture of the state of affairs in order to induce the SPAC shareholders to remain committed to the transactions”. Instead, these alleged breaches had “materially increased the combined entity’s litigation and regulatory exposure post-merger.”

“The Universal Entertainment parties accordingly seek to remedy these breaches through declaratory relief that will permit [the group] to part ways with this fundamentally untrustworthy and dishonest SPAC promoter,” it is stated in the document.

GGRAsia is approaching 26 Capital, seeking comment on the counterclaims made by UE Resorts International Inc and the three other companies.

Litigation by 26 Capital

It was announced last month that 26 Capital was suing Tiger Resort, Leisure and Entertainment – the promoter of the Okada Manila casino resort – urging the prompt consummation of a previously-announced merger between the two sides.

Universal Entertainment unveiled in October 2021 a merger agreement involving 26 Capital, which would result in Okada Manila becoming a publicly traded company listed on Nasdaq.

The merger and subsequent listing operation was initially expected to be completed by the end of June 2022. However, it was delayed several times, against the backdrop of what Universal Entertainment claimed was an “illegal” occupation between May 31 to September 2, 2022 of Okada Manila, when people acting on behalf of the resort’s ousted founder, Kazuo Okada, first occupied and then ran the property.

In a February filing, Universal Entertainment had stated that, “while the deadline of the merger agreement has been changed to September 30, 2023″, 26 Capital had requested the court to “declare that the [Universal Entertainment] subsidiaries have breached the obligation to consummate the merger promptly under the merger agreement.”

In addition, stated Universal Entertainment at the time, 26 Capital was also asking the court to require the Japanese side’s subsidiaries “to consummate the merger promptly”.

In September 2022, when announcing that the deadline of the merger agreement had been changed to September 20, 2023, Universal Entertainment said that it intended “promptly” to carry out the merger, “even prior to the deadline, once the environment to do so is in place.”

Casino gross gaming revenue at Okada Manila for the three months to December 31, 2022 was nearly PHP10.50 billion (US$191.9 million), from PHP7.01 billion in the prior-year period, while full-year GGR was PHP34.34 billion, from nearly PHP18.92 billion in 2021, according to Tiger Resort, Leisure and Entertainment.