Genting Malaysia will acquire the remaining 10% share in Empire Resorts Limited, registered in the state of New York, the family trust of Lim Cock Tai and his family for $ 41 million plus additional debt.
On the purchase of a share of participation (Membership Interest Purchase Agreement) was announced on Friday in a statement on the Bursa Malaysia exchange and includes both a monetary reward and the adoption of intra -corporate debt, which Empire owes Kien Huat Realty IIII (KH) Limited, belonging to the Lim family, $ 39.7 million.
KH currently owns 51% of ordinary shares of Empire Resorts, and Genting Malaysia – 49% remaining. However, Genting Malaysia includes 90% of Empire losses as part of accounting by shared participation, as it also owns privileged convertible Empire shares.
Lim holds the post of chairman and general director of Genting Berhad and owns a personal share in the company of 44.7%, and Genting Berhad owns 47.1% of Genting Malaysia shares. Lim is also Deputy Chairman and General Director of Genting Malaysia.
Among the Empire assets is the Resorts World Catskills, located 90 miles north of New York, Resorts World Hudson Valley and Sports operator through the Resorts World Bet mobile devices.
Analysts at the financial company Nomura Tushar Mohat and Alp Aggarval described the transaction as a negative, noting that Empire continues to incur losses at the level of net profit, despite the numerous injections of capital from shareholders. Since 2019, Genting Malaysia has already invested $ 720 million in the company and, in their opinion, will probably continue to provide financial support to business.
“Like the previous tranches, we also negatively evaluate this last deal and believe that investors will perceive it as another transaction with related parties, which harms the prospects of Genting Malaysia.
This is due to the fact that there is no clear way to the sustainable restoration of Empire results, and after this transaction, as a result of which Genting Malaysia will become 100% by the owner of Empire, the company is likely to continue the infusion of capital to support the Empire business, ”Mohat and Aggarsa wrote.
Genting Malaysia will have to consolidate a significant share of Empire losses.
Nomura reduced the rating of Genting Malaysia shares with “buy” to “reduce”, explaining that it now takes into account higher interest costs, depreciation and losses from participation with Empire, in addition to the already weak post-COVID dynamics of the company.
“Our previous expectations of profit recovery (for Genting Malaysia) after the opening of the economy at the end of the COVID-19 pandemic did not materialize due to the structurally high costs of the company after significant capital investments, which have not yet brought the expected return,” analysts said.
The reduction in the rating followed the results for the 4th quarter of 2024, which turned out to be negative. There was also a decrease in dividends and reassessment of shares continues, which, as suggested in Nomura, will continue until clear signs of profit restoration.
In a separate note, the Maybank investment bank noted about the decision of Genting Malaysia about the full redemption of Empire Resorts: “We do not consider this proposal as positive, but we hope that this will be the last deal with the bound parties that destroys the cost.”
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