A U.S. court in Delaware has issued a ruling stating that Japanese conglomerate Universal Entertainment Corp is not obligated to proceed with a merger agreement involving United States-listed 26 Capital Acquisition Corp for the listing of the Okada Manila casino resort in the U.S. The judge, Vice Chancellor Travis Laster, cited multiple factors for this decision.
The Background of the Merger Agreement
In February, 26 Capital filed a lawsuit against Tiger Resort, Leisure and Entertainment Inc (the promoter of Okada Manila) and other Universal Entertainment subsidiaries, urging the completion of a previously-announced merger between the parties. Universal Entertainment later decided to terminate the deal on June 30, citing material breaches of the merger agreement and alleging fraudulent conduct by 26 Capital.
Ruling Details
Vice Chancellor Laster’s ruling clarified that Universal Entertainment does not have to complete the merger but noted that 26 Capital is entitled to seek damages. The judge expressed his intention to address the matter of damages at a later date.
Conduct of 26 Capital
The judge cited 26 Capital’s conduct as a factor in his decision. He revealed that 26 Capital’s deal adviser, Alex Eiseman, who also owned over 60 percent of a 26 Capital affiliate, did not disclose this ownership to Universal Entertainment. This created a conflict of interest, with Eiseman potentially benefiting if 26 Capital secured a better deal from Universal Entertainment. The judge characterized this as a “conspiracy to mislead Universal.”
Lack of Means to Enforce
Vice Chancellor Laster pointed out that even if the court ordered the merger to proceed, it lacked the means to oversee and enforce its order effectively, as all actions would have to be conducted in Manila, where parties involved had domiciles and significant assets.
Implications
The initial merger deal, announced in October 2021, valued Okada Manila at US$2.6 billion. The merger and listing operation were initially set to be completed by the end of June 2022 but faced delays due to various factors, including an “illegal” occupation of Okada Manila by individuals acting on behalf of its ousted founder, Kazuo Okada.
This ruling marks a significant development in the ongoing dispute surrounding the merger agreement between Universal Entertainment and 26 Capital. It underscores the complexities and challenges in cross-border transactions, particularly when legal jurisdictions and interests are involved. Universal Entertainment’s plans for listing Okada Manila in the U.S. are now in question, pending further legal proceedings.