Universal Vows to Fight ‘Outrageous’ Wynn Sale
Japanese billionaire Kazuo Okada’s Universal Entertainment Corp. said it will take legal action after Wynn Resorts Ltd. (WYNN) forcibly redeemed Universal’s stake at a 31 percent discount and accused Okada of improper payments.
Universal (6425), which plunged in Tokyo trading, will “take all legal actions necessary to protect its investment in Wynn,” the pachinko machine maker said today in a statement. The company didn’t specify any legal remedies.
Okada violated U.S. anti-corruption laws and made cash payments and gifts valued at about $110,000 to Philippine gambling regulators, Las Vegas-based Wynn Resorts said in a statement yesterday, citing its own investigation.
“The decision by the Wynn board, which followed a rushed investigation that lacks absolute findings, to redeem Universal Entertainment’s nearly 20 percent holdings in Wynn Resorts based on its project in the Philippines is outrageous,” Universal said in the statement. “We have not even been provided with the opportunity to review” the report by Wynn’s investigation committee, the company said.
Okada visited the office of regulator Philippine Amusement and Gaming Corp. in Manila today and denied giving cash gifts to the officials, the regulator said in an e-mailed statement.
Okada told the chairman of the regulator, Cristino Naguiat, that allegations of about $110,000 in gifts to officials were “complimentary accommodations” granted to Okada’s business associates from the Philippines and other countries from 2008 to 2011, it said. The billionaire also apologized to the regulator for including the agency and its officials in the dispute, it said.
Wynn redeemed the 24 million shares held by Aruze USA Inc., a pachinko company controlled by Universal, and issued a 10-year $1.9 billion promissory note for the stock, the U.S. company said in the statement. The amount would be 31 percent less than the value of $2.77 billion based on Universal’s Feb. 17 closing price of $112.69 in New York, according to the calculations with data compiled by Bloomberg.
Universal Share Plunge
Universal (6425) plunged by its daily maximum 21 percent in Tokyo, the biggest drop since its listing in September 1998. Wynn Macau Ltd. unit rose 3 percent to HK$20.90 at the close in Hong Kong, the highest level since Jan. 27.
“Wynn Macau is rising of the possible removal of an overhang,” said Adrian Lowe, an analyst at Mirae Asset Securities in Hong Kong. “But it’s not necessarily the end of this saga, there are still a lot of questions left unanswered.”
The forced redemption escalates a dispute between Chief Executive Officer Stephen Wynn and Okada, who helped bankroll the company starting 12 years ago. Okada was stripped of his vice-chairman role last year after he accused Wynn Resorts of improprieties in a Macau university donation that’s the subject of a lawsuit and a U.S. regulatory inquiry.
Last month, Okada sued Wynn Resorts in state court in Clark County, Nevada, to try to force the company to produce spending records. That case is pending. Okada opposed Wynn Resorts’ HK$1 billion ($129 million) pledge in July 2011 to the University of Macau Development Foundation.
Wynn Resorts has said the dispute stemmed from Okada’s decision to compete by pursuing projects in the Philippines. Okada was removed as vice chairman after admonishments from the board over the plan, Wynn Resorts said. The company said yesterday that it will recommend that he be dropped from the board of Wynn Macau as well.
“This will not change the nature of the company,” said Zeman. “Mr. Okada is a partner but he is not involved in the day-to-day business.” He declined to give a date for naming Okada’s replacement.
Wynn Resorts also filed suit against Okada, Aruze USA and Universal Entertainment in Clark County for breach of fiduciary duty and related offenses, according to Wynn’s statement yesterday. The filing couldn’t be confirmed independently through electronic court records.
Gidon Caine, an attorney for Okada, didn’t return voice- mails seeking comment.
The U.S. Securities and Exchange Commission has requested information about Wynn’s donation to the university foundation. Wynn was asked in an informal inquiry by the SEC’s Salt Lake City office on Feb. 8 to preserve information about the commitment, the company said in a Feb. 13 regulatory filing.
The Macau pledge was consistent with Wynn’s practice of supporting institutions in markets where it operates, the Las Vegas-based casino operator said. Wynn Resorts said that it will comply with the SEC request and that the stated objection of Okada, who cast the lone dissenting vote among Wynn and Wynn Macau directors, concerned the length of time over which the donation would occur, not its propriety.
Wynn Resorts said yesterday that, to protect the company’s gambling licenses, it can redeem shares for “fair value” from a person found “unsuitable” under its articles of incorporation. An independent financial consultant helped calculate the fair value, and Okada’s stake was redeemed at a discount because of restrictions on the shares, Wynn said in the statement.
“Mr. Okada probably doesn’t have a lot of options but to follow through on litigation as well and to defend his position,” Christopher Jones, a senior gaming analyst at Telsey Advisory Group in New York, said in a telephone interview. “I will not expect for the legal headlines to cease with this move by Wynn.”
The earlier case is Okada v. Wynn Resorts Ltd., A-12-654522-B, District Court, Clark County, Nevada (Las Vegas).
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