Genting Malaysia’s Empire Bid Saps Share Value

• Genting will team up with Kien Huat to create a new entity for Empire Resorts
• The company’s shares take an 11% tumble
• The company is acquiring shares worth $128.6 million total in Empire Resorts

Genting Malaysia has made multiple headlines, announcing its intentions to acquire Empire Resorts and dispose of 35 percent share in a cruise company.

Genting Malaysia Empire Resorts Restructuring

On Wednesday, Genting Malaysia announced a binding term sheet with Kien Huat Realty III Ltd, a family trust of the company’s Chairman, Lim Kok Thay. As a result, the company’s subsidiary, Genting USA Ltd. will be acquiring a 35-per-cent stake in Empire Resorts, with estimated 13.2 million shares changing hands in the move.

The transaction is intended to allow Genting to acquire the remainder of shares in Empire Resorts, which aren’t presently owned by Kien Haut. Haut owns 86 percent of the shares. Genting is also keen on gaining full proprietorship over the company as it would allow it to also consolidate control in Resorts World Catskills, a New York-based racetrack which is a draw for local sports fans.

Subject to Approval

Without any confirmation from authorities yet, Genting Ltd. will purchase the shares for the total value of $128.6 million at a rate of $9.74 per single share. In fact, a total of 13.2 million shares will be transferred to the U.S. subsidiary.

After this transaction has been completed, Kien Haut and Genting USA Ltd. will pool all their shares in Empire Resorts to form a new joint-venture which will share control in the company. This is a good bargain for Genting, which will own 49 percent of the shares in the entity, letting Kien Huat take the controlling number of assets.

Explaining the reasons behind the move, Genting Malaysia said that it is hoping to boost awareness for the Resorts World brand as well as attract more customers, boost marketing efforts and help develop Empire’s product further.

The Markets Respond to the News

Genting Malaysia share took a tumble on Wednesday after the news broke. Instead of going up, the shares dropped by 11.91 percent, taking Genting Berhad’s shares in the process and writing off 7 percent of the value as well.

Genting Malaysia loses RM3.15b market cap on earnings erosion risks https://t.co/wc4xPtAYze

— MSN Malaysia (@MSNMSIA) August 7, 2019

While some considered the move to be unnecessarily complicated, others said that Genting was right to leverage the popularity of Resorts World Catskills instead of investing into a similar project independently.

The Moves Abroad

This wasn’t the only news for the company. Experimenting with multiple verticals, Genting Hong Kong has been the latest of Genting’s subsidiaries to make headlines. The company is shedding a 35-percent stake in Dream Cruises, a cruise ship company. Here is what Genting had to say commenting on the decision:

“Strengthen the Group’s balance sheet and its ability to continue to expand its fleet in the cruise industry. The disposal would also reduce the Group’s financial burden in meeting future funding requirements in relation to Dream Cruises’ business.”

The money coming from the sell-off will be used to expand Genting’s fleet of cruise ships, which currently number the Genting Dream, World Dream and Explorer Dream. Genting will dispose of the stake by selling it to Canadian TPG Darting Ltd., with the overall stake reduced from 100 percent to 65 percent.