This article first appeared in The Edge Malaysia Weekly on January 15, 2024 - January 21, 2024
Genting Malaysia Bhd’s share price took a beating in August 2019 when it bought a 49% equity stake in financially stressed Empire Resorts Inc, which owns a casino-resort in Sullivan County, about 90 miles from New York City.
It bought the stake from its controlling shareholder Tan Sri Lim Kok Thay for US$128 million (RM538 million) cash. Meanwhile, Genting Malaysia forked out an additional US$35.8 million to buy out the remaining 14% stake in Empire Resorts to take it private.
Shareholder approval was not required for the related party transaction (RPT) because the amount involved was below the threshold of 5% of Genting Malaysia’s total assets.
As with the past RPTs undertaken by Genting Malaysia, the acquisition drew a backlash over concerns about its merits.
The main concern was that it would cost Genting Malaysia more than RM538 million to revive Empire Resorts’ financial health before seeing any contribution from the investment.
Furthermore, about two weeks prior to the deal, Kien Huat Realty III Ltd, Lim’s investment vehicle, informed Empire Resorts that it would not commit further funds beyond what it was obliged to.
It was apparent that a recapitalisation would fall on Genting Malaysia’s shoulders.
Over the past four years, Genting Malaysia’s investment in Empire Resorts has totalled US$724.4 million, with a chunk of the money supposed to have been used to subscribe to the latter’s preferred stocks, as it needs to raise working capital and repay debts. In the latest capital injection, Genting Malaysia will subscribe to 1,000 of Empire’s Series M preferred stocks.
The investment of US$724.4 million is five times the original sum and has exceeded 5% of Genting Malaysia’s total assets. The group’s total assets stood at RM29.66 billion as at end-September 2023.
Lim pocketed RM538 million cash by selling the 49% stake to Genting Malaysia. It is anybody’s guess when the group will be dealt a good hand and see Empire Resorts reverse its fortunes.
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