Universal Entertainment subsidiary, UE Resorts, formerly known as Okada Manila, has announced a delay in its planned merger with special purpose acquisition company (SPAC) 26 Capital. This delay will also push back the listing of the company on the Nasdaq stock exchange by up to a year. The ongoing dispute between the company and its former CEO, Kazuo Okada, has caused significant setbacks and legal complications, leading to the need for more time to resolve the issues before proceeding with the merger.
Background:
In October 2021, UE Resorts initially revealed its acquisition plans with 26 Capital, a Nasdaq-listed SPAC founded by activist investor Jason Ader. The merger deadline, initially set for September 30, 2022, has now been extended to September 30, 2023. This marks the second extension, as the original deadline was already delayed by three months from June 30.
Reasons for the Delay:
The delays stem from a prolonged standoff between the company and its former CEO, Kazuo Okada, a prominent Japanese billionaire. The dispute has involved numerous lawsuits, jurisdictional questions, criminal allegations, and even physical confrontations between representatives of both parties. UE Resorts cited the need to “normalize the operating structure” after regaining control of the Okada Manila facility and operations as the primary reason for the deadline extension. Additionally, the company mentioned the time required to amend the registration statement filed with the US Securities and Exchange Commission for the merger.
Legal Battles and Okada’s Return:
In 2017, Kazuo Okada was removed from his positions within the company following allegations of fund misappropriation. However, the legality of his removal was called into question when the Philippines Supreme Court issued a status quo ante order, effectively reinstating Okada to his former roles. Universal Entertainment’s holding company, Tiger Resort Asia, argued that the order did not apply to the business as it was primarily based in Hong Kong, allowing them to disregard the Philippines court’s decision. Subsequently, Okada, along with police, PAGCOR representatives, and court officials, gained control of the property, which lasted for two months before the regulator withdrew its recognition of the Okada-appointed board. Universal Entertainment eventually regained control of the resort.
Impact on the Merger Agreement:
During Universal Entertainment’s control of the venue, the company accused Okada’s employees of damages that potentially affected the SPAC combination agreement. The business alleged that Okada’s subordinates had destroyed contracts, taken evidential documents without permission, wrongfully seized real assets, and falsified digital data. These actions led to further complications and the need for additional time to address the issues.
Future Outlook:
While the new completion date for the merger is set for one year in the future, UE Resorts expressed its intention to complete the agreement promptly once the environment is conducive to do so. The company emphasized the possibility of finalizing the merger before the extended deadline, indicating its commitment to moving forward as soon as the necessary conditions are met.
The planned merger between UE Resorts (formerly Okada Manila) and 26 Capital has faced significant delays due to the protracted legal dispute involving Kazuo Okada and its impact on the operating structure. The company has chosen to extend the merger deadline by a year to ensure the resolution of outstanding issues. Despite the setback, UE Resorts remains committed to finalizing the merger promptly when the circumstances allow, aiming to proceed with the transaction ahead of the extended deadline.