Bursa scrutinises Genting Malaysia's buyout of loss-making US unit
Some analysts said Genting Malaysia's acquisition of Empire Resorts is expensive and potentially profit-dilutive. (File pic)
PETALING JAYA : Bursa Malaysia Securities Bhd has grilled Genting Malaysia Bhd (GENM) over its proposed US$41 million (RM177 million) buyout of loss-making Empire Resorts Inc (ERI) from the Genting group's founding Lim family.
The bourse regulator slapped the gaming and resort operator yesterday with 20 questions on the deal, which raised eyebrows among some analysts and investors.
GENM announced last Friday it is acquiring the remaining 51% stake in Genting Empire Resorts LLC (GERL) it does not currently own for US$41 million from Kien Huat Realty III Ltd, a vehicle of the Lim family led by Lim Kok Thay, the son of Genting founder Lim Goh Tong.
The group currently has a 49% interest in GERL, which wholly owns ERI that has gaming properties in New York state. Under the deal, Kien Huat Realty III will also assign a US$39.7 million (RM170 million) debt to GENM that ERI owes to it.
Some analysts have labelled the acquisition as expensive and potentially profit-dilutive, and will likely be a financial drag on the group. Concerns have also been raised that it is an unfavourable related party transaction (RPT).
That Bursa slapped GENM with 20 questions perhaps reflects the greater scrutiny the regulator has on the transaction, which has garnered keen investor interest.
It asked GENM to state the rationale for acquiring the remaining 51% in GERL given the latter had already invested substantially in the preferred stocks of ERI, which is convertible to common stocks in the company.
Bursa also wanted GENM to state the justifications for the purchase consideration of US$41 million, and to justify the premium paid for the 51% interest in GERL.
It sought a clarification on whether the market value range of the common stock of US$36.5 million to US$46.9 million is the market value ascribed for 100% interest in ERI.
The regulator also wanted details on the liabilities and guarantee to be assumed by GENM arising from the proposed acquisition.
Bursa asked the group to explain the increase in its total borrowings from RM12.22 billion to RM13.49 billion post-acquisition.
In its reply, GENM said the acquisition falls within the independently assessed market value range of US$36.5 million to US$46.9 million for ERI. It added the valuation was performed by independent valuer CBRE Securities LLC on April 22, 2025.
It said no additional liabilities, including contingent liabilities and guarantees, will be assumed by the company, aside from paying the purchase price.
It said GERL posted a net loss of US$54.1 million for the financial year ended Dec 31, 2024 (FY2024), down from US$65.4 million in FY2023. It incurred a US$53.4 million net loss in FY2022.
ERI, meanwhile, posted a lower net loss of US$53.1 million in FY2024 from US$57 million in FY2023, but higher than US$44.2 million in FY2022.
GENM said ERI will concentrate on increasing gaming revenues for its Resorts World Catskills by broadening its demographic reach to key upstate markets.
However, it cautioned there is no guarantee ERI will be able to maintain a positive trajectory in its financial and operational performance.
GENM's investments in ERI prior to the latest acquisition totalled US$724.4 million (RM3.1 billion), after it made several capital injections through common and preferred stocks in recent years.
According to its 2024 annual report, the 73-year-old Kok Thay and his son, Keong Hui, 40, have a deemed interest of 49.35% in GENM as of March 17, 2025.
Kok Thay is GENM's deputy chairman and chief executive while Keong Hui is the group's deputy chief executive and executive director.
In a recent note, Public Investment Bank said the deal was an 'unfavourable' RPT that suggests 'corporate governance remains a concern' for GENM.
GENM's shares closed 3 sen or 1.7% higher at RM1.76, valuing the group at RM10.45 billion. Year to date, the counter has fallen 22%.
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