Minority Shareholder Sues Empire Resorts Casino Company Over Sale to Malaysian Billionaire

  • Lawsuit comes after Genting Malaysia acquired Resorts World Catskills casino's parent company
  • It claims major shareholders did not consider smaller investors in sale deal
  • Plaintiff seeking damages and looking to prevent Empire Resorts from going private
  • Billionaire owner KT Lim maintains takeover was a rescue deal to address casino's debt issues
man in suit sits at table which holds judge's gavel and Lady Justice
David Mullen, a minority shareholder of Empire Resorts, is suing the company following its acquisition by a Malaysian billionaire. [Image: Shutterstock.com]

Parent company sued

A minority shareholder of Empire Resorts, the parent company of upstate New York casino Resorts World Catskills, is suing the firm following its acquisition in August by Malaysian billionaire KT Lim.

the majority of shareholders did not take into account the smaller investors

The man at the center of the lawsuit is New Jersey native David Mullen. The case, which was filed with the Sullivan County Supreme Court in New York, claims the majority of shareholders did not take into account the smaller investors in the sale deal. 

Aim of the lawsuit

According to Mullen’s lawyers, Empire Resorts did not consider any other bids as part of the sale process. They claim a preference was shown for Genting Malaysia. Mullen believes the stock price was devalued before the sale as there was no competitive bidding process.

As well as seeking damages, the lawsuit aims to stop Genting from privatizing Empire Resorts once again. It also seeks class-action status, claiming shareholders did not receive enough details of the transaction. Mullen maintains this was done deliberately to close the sale quickly. 

Shareholders can vote formally on the acquisition before the close of 2019. However, Kien Huat already has a majority shareholding which naturally supports the takeover.

Acquisition deal

Lim’s family trust, Kien Huat Realty, already owned 51% of Empire Resorts before the entire acquisition. The remaining 49% stake is now under the control of Genting Malaysia, and will see the company going private once more. 

The acquisition deal got approval from the five board members of Empire Resorts and saw every public share being bought for $9.74 – a 15% premium on the closing share price that day. The total deal was worth about $128.6m.

One of the board members behind this decision was also a Kien Huat Realty director. 

Casino struggles

KT Lim, who is worth in the region of $3.4bn, sees the full acquisition of Empire Resorts as a rescue deal. The Resorts World Catskills casino resort has been struggling since first opening in February 2018. It cost about $1.2bn to develop and was averaging monthly operating losses of $12.4m.

According to Lim, one major reason for the significant monthly losses boiled down to the steep interest rates that creditors were imposing. By taking the company private, he says these rates can be lowered to give further stability to the casino. He hopes this will eventually lead to profitability.

Meeting debt obligations

Keith Horn, the special committee chair and an independent director of Empire Resorts, spoke about how the Resorts World Catskills casino’s debt situation can be improved with the Genting takeover. 

the Resorts World Catskills casino’s debt situation can be improved with the Genting takeover

He said: “Kien Huat has agreed to provide incremental credit support to Empire Resorts, which will enable the Company to meet its debt obligations as we continue to execute on our business strategy.”

Currently, the company’s debt obligations sit around the $400m mark. The performance of the casino itself has been severely underwhelming in comparison to the initial forecasts. 

What does the future hold?

Prior to the opening of the Resorts World Catskills casino, the parent company told the New York State Gaming Commission that the gross gaming revenues would reach $300m in 2019. By the start of September, actual revenue was just over $140m. 

Genting plans to bring cost synergies and increasing revenue to the casino by leveraging the company’s decades of experience in the casino and resort industry.