On September 8, a Delaware court ruled that the operating arm of Philippines integrated resort Okada Manila may opt out of planned merger with Jason Ader’s 26 Capital Acquisition Corp., based in the United States.
According to Reuters, the judge in the case found that 26 Capital “engaged in conduct that should not be rewarded” as part of its efforts to close the deal, which would have listed the merged entity on Nasdaq.
Okada Manila terminated the agreement on June 30 claiming “various material breaches of the merger agreement and fraudulent conduct by 26 Capital … that were discovered in the litigation process.”
According to Inside Asian Gaming, Ader then filed suit against a number of Okada units—Tiger Resort Asia Ltd. (TRAL); Tiger Resort, Leisure and Entertainment Ltd. (TRLEI); UE Resorts International Inc. (UERI); and Project Tiger Merger Sub. Inc., all subsidiaries of Universal Entertainment Corp. of Japan—alleging they failed in their obligation to complete the merger promptly. The suit also asked that Okada Manila be required to close the deal.
In its response, Judge Travis Laster of the Delaware Court of Chancery ruled that forcing the merger could breach a 2022 court decision handed down in the Philippines. That directive ordered TRLEI’s onetime board to be reinstated under the leadership of ousted Universal founder Kazuo Okada.
Okada got the boot in 2017 following charges that he embezzled company funds; the Japanese billionaire viewed the status quo ante order as authorization to seize control of the Manila property that bears his name. He and his associates controlled the property—Manila’s largest integrated resort—for three months in 2022, before being removed by a subsequent court order.
The Delaware court also considered information that 26 Capital never told TRLEI that its chief advisor in the merger, Zama Capital hedge fund founder Alex Eiseman, owned more than 60 percent of a 26 Capital affiliate.
“That meant the hedge fund would profit if the SPAC got a better deal” from Universal Entertainment, according to Laster.
“Not knowing that its contractual advisor was playing for the other team, (Universal) entered into the merger agreement,” Laster wrote. “After signing, the target hired the hedge fund to assist with a series of deal-related tasks. When pursuing those tasks, the hedge fund continued to work as the SPAC’s partner and against its client. It was not until this litigation that the target learned the truth.” He described Eiseman’s role with 26 Capital as “a conspiracy to mislead Universal.”
According to GGRAsia, the judge also left the door open for 26 Capital to seek damages in the case; 26 Capital has called the fraud allegations “meritless.”
On September 11, Universal conceded in a filing that there will “likely be an appeal” by 26 Capital. The Japanese firm stated that it will “continue to assert the legitimacy” of its claims.
