Overview:
After a protracted legal battle spanning over a decade, Bloomberry Resorts Corp has announced a landmark settlement with its former partner, Global Gaming Asset Management (GGAM) Philippines LLC. The resolution entails Bloomberry repurchasing 921,184,056 shares from GGAM at a rate of Php18.32 per share, amounting to a total of US$300 million. However, the finalization of the deal hinges upon the Regional Trial Court in Makati lifting a writ of preliminary injunction and attachment on GGAM’s shares, coupled with the Philippine Depository and Trust Corp’s removal of all suspensions and restrictions on share transactions.
Background:
The dispute traces back to a Management Services Agreement signed prior to the opening of Solaire Resort in 2013. Under this agreement, GGAM was contracted to provide technical services related to Solaire’s design, construction, employee recruitment, and attracting high-rollers to the property. Bloomberry terminated the agreement six months post-Solaire’s opening, alleging GGAM’s failure to meet contractual obligations, particularly in fulfilling promises regarding high-roller patronage and addressing concerns over casino design and layout. Subsequently, GGAM filed a lawsuit for wrongful termination, sparking a protracted legal battle across multiple jurisdictions, including the Philippines, Nevada, and Singapore.
Implications:
The settlement not only brings an end to all pending litigation between the two entities but also carries significant financial and operational implications. Bloomberry’s decision to repurchase GGAM’s shares at a premium rate underscores its commitment to resolving the dispute and regaining control over its operational landscape. However, this move will lead to a reduction in Bloomberry’s free float by 8.1% points, bringing it down to 29.1%. Despite this decline, analysts remain optimistic about Bloomberry’s prospects, maintaining a “BUY” rating on its shares. The share price decline prompted by the settlement presents an opportune moment for investors, with Bloomberry’s 2024 estimated EV/EBITDA standing at an attractive 8x.
Analyst Insights:
According to Maybank Securities analyst Raffy Mendoza, the transaction’s impact on Bloomberry’s free float notwithstanding, the favorable EV/EBITDA ratio and the share price decline create a compelling investment opportunity. Mendoza’s assessment aligns with broader market sentiments, reflecting confidence in Bloomberry’s ability to navigate the aftermath of the settlement and sustain its growth trajectory.
The resolution of the longstanding legal dispute between Bloomberry Resorts Corp and GGAM Philippines LLC marks a significant milestone for both entities. As Bloomberry moves forward with its repurchase agreement, the company stands poised to consolidate its position in the competitive casino market. Moreover, the settlement paves the way for renewed focus on operational efficiency and strategic growth initiatives. With analysts bullish on Bloomberry’s prospects, the stage is set for a new chapter of prosperity and stability in the company’s journey.