Empire Resorts’ minority shareholder sues Genting Malaysia, Kien Huat Realty for unfair privatisation deal

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KUALA LUMPUR (Oct 16): A minority shareholder is suing Empire Resorts Ltd, its board members and the controlling shareholders — Genting Malaysia Bhd (GENM) and Kien Huat Realty III, for the unfair offer to take the US-based casino operator private.

According to Times Herald-Record's website, minority shareholder David Mullen from New Jersey made the claim in a suit filed onTuesday in the Supreme Court in Sullivan County.

The suit named Resorts World Catskills' parent company, Empire Resorts' executive chairman of the board Emanuel Pearlman, board members Keith Horn, Gerard Ewe Keng Lim, Edmund Marinucci and Nancy Palumbo, plus companies representing Empire Resorts' largest shareholders.

Kien Huat Realty III, an investment vehicle controlled by Tan Sri Lim Kok Thay, and GENM are the majority shareholders which collectively control an 86% stake in Empire Resorts via their joint-venture company, Hercules Topco LLC. Lim also owns an indirect stake of 49.45% in GENM.

Mullen, who was seeking class-action status for minority shareholders, accused Empire Resorts and its board of not providing sufficient information required to assess the privatisation offer jointly made by GENM and Kien Huat. Furthermore, he claimed that the privatisation deal was endorsed by board members who would financially benefit from it.

The suit also claimed that Lim and GENM scared off third-party offers by publicly declaring, via Empire Resorts' financial filings, that they would not entertain buyout proposals they deemed unsuitable for Empire Resorts, according to Times Herald-Record.

In addition, Mullen claimed that Empire Resorts was deemed undervalued based on the privatisation offer of US$9.74 per share.

The suit sought unspecified damages, and it called for a halt to Lim and GENM's effort to take the company private, so that Empire Resorts could reassess its value and seek other offers.

Representatives of GENM and Empire Resorts were quoted by Times Herald-Record as saying they would not comment on pending litigation.

Empire Resorts Inc, in which GENM is going to buy a 46% stake for US$128 million (RM538 million), is facing a liquidity problem which is so severe that it has prompted the US-based casino operator to consider voluntary Chapter 11 bankruptcy.

Through a related party transaction (RPT) that has drawn criticism, GENM bought an effective 35% stake in the cash-strapped Empire Resorts Inc from Lim, who is also its chief executive officer and chairman, for RM538 million cash.

As much as RM3.27 billion of market capitalisation had evaporated from GENM in August as it came under fierce selling pressure since the announcement of the RPT.

Following the share acquisition, GENM and Kien Huat joined hands to take Empire Resorts private at US$9.74 per share of common stock.