(Bloomberg) -- Executives at Japan’s Universal Entertainment Corp. spent much of the past year coming up with creative ways to scuttle the $2.6 billion merger of their Okada Manila casino resort unit with a blank-check company, a former partner in the deal told a US judge.
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Jason Ader founded 26 Capital Acquisition Corp., a special-purpose acquisition company, which agreed to combine with the Okada resort to give it a NASDAQ stock listing. But Ader, whose firm sued to revive the failed deal, testified Monday that Universal started working to sabotage the Philippines casino transaction starting in 2022. Universal declared the merger dead on June 30.
“We got zero cooperation” in closing the deal, Ader told Delaware Chancery Judge Travis Laster during the first day of trial testimony. Ader is a veteran gaming-industry analyst and on the board of the Las Vegas Sands Corp. He’s now chief executive officer of SpringOwl Asset Management LLC.
The dispute involves a $275 million investment by 26 Capital in the 100-acre Okada Manila resort and casino, which is valued at $2.6 billion. Universal owns 88% of the property under the terms of the deal. But Universal and its units managing the casino have been at odds after its founder — billionaire Kazuo Okada — was ousted from the board and arrested on a visit to the Philippines last year.
Okada was removed from the board of Tiger Resort Leisure & Entertainment, the unit operating the casino and resort, in 2017 after fraud and embezzlement allegations arose. Last year, the Philippine Supreme Court reinstated him as director, CEO and chairman of the casino. Okada later was removed from control of the resort after the Tiger Resort faction regained control of the property.
‘Illegal Occupation’
The billionaire is accused of launching an “illegal occupation” of the 993-room resort in May 2022, and physically ejected officials of the Tiger Resort unit, court filings show.
Ader said his struggles to get Universal executives to take the final steps to close the deal — which his lawyers described in US football terms as “being on the one-yard-line” — raised suspicions they’d abandoned their vows under the agreement to use their “reasonable best efforts” to finalize the transaction.
Ader told Laster he still thinks the merger has value and wants the judge to order Universal officials to honor their combination agreement. He noted the Philippines is the second-fastest gaming market in Asia and the resort isn’t valued properly. “My general view is this is still a great deal,” he said.
The 26 Capital lawsuit is the most recent development in a wave of litigation over SPAC mergers, which combine publicly traded shell entities with private businesses while bypassing traditional initial public offerings. Such combinations have slowed to a trickle from their 2020 peak.
The trial is being held in Delaware because that’s where 26 Capital is incorporated. The state is the corporate home to more than 60% of Fortune 500 companies. Its chancery court judges also are known for their speedy handling of M&A fights without juries.
The case is 26 Capital v. Tiger Resort Asia, 2023-0128, Delaware Chancery Court (Wilmington).
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