Japanese gaming conglomerate Universal Entertainment Corp. has ended a long-planned deal with U.S.-based 26 Capital Acquisition Corp. that would have listed the operator on the NASDAQ stock exchange in the U.S. In turn, 26 Capital is suing its would-be partner, while also holding out the possibility that the merger will come to fruition.
Universal is the parent company of Okada Manila, a casino resort in the Philippine capital. The 26 Capital entity is a NASDAQ-listed special purpose acquisition company (SPAC).
Their alliance was first conceived in October 2021 and was originally scheduled to be complete by July 2022. Consummation of the deal was delayed by the takeover of Okada Manila by a faction representing Universal founder and former boss, Japanese billionaire Kazuo Okada.
In 2017, Okada was ousted from his companies for allegedly embezzling and misusing company funds. He worked for years to regain control of the entities that control the IR in Manila’s Entertainment City casino zone. In May 2022, his representatives seized control of the IR, but the occupation ended September 2, when the Philippine Amusement and Gaming Corp. (PAGCOR), which regulates gaming in the country, ordered the
Okada-backed group to exit the IR and make way for the previous board.
As reported by GGRAsia, Universal and 26 Capital have been at war over the planned merger and listing since February, when 26 Capital sued Tiger Resort, Leisure and Entertainment Inc. (TRLEI), the IR promoter, and three other Universal Entertainment subsidiaries for delaying the merger. In turn, Universal accused 26 Capital of “various material breaches of the merger agreement and fraudulent conduct … that were discovered in the litigation process.”
According to Inside Asian Gaming, in mid-June Universal learned that a firm called Rimu Capital Ltd. had filed suit against 26 Capital head Jason Ader and others in the Southern District Court of New York for the cancellation of $25 million worth of 26 Capital stock transactions by Rimu, as well as “fraud and violations of the Investment Advisors Act, etcetera.” The Japanese group said 26 Capital and Ader undertook a “concerted and increasingly erratic campaign … to pursue closing at all costs in pursuit of a windfall.” It accused Ader of personally misleading investors with statements that glossed over the turbulence at Okada Manila.
In a June 30 filing, Universal announced it had “resolved the termination of the merger agreement,” effective immediately. Universal and its units are seeking damages for costs, expenses, fees and other losses associated with the merger agreement.
According to 26 Capital, its suit against Universal will start this week. In an email to GGRAsia, the U.S. company wrote, “26 Capital is eager to commence trial on July 10, 2023 and remains fully committed to closing the transaction and improving the merged company’s corporate governance. … 26 Capital believes that the termination notice is baseless.”
The court case will be heard by a court in Delaware.
