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Melco to sell entire stake in Elixir International

Newsdesk by Newsdesk
Tue 20 Apr 2010 at 00:00
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Shares in Melco International Development Ltd were suspended in Hong Kong today after it announced plans to sell off its stake in its subsidiary Elixir International.

Melco International (also known as Melco Group) is a joint venture partner in the Macau casino market with Australia’s Crown Ltd. Elixir International is itself a subsidiary of another Melco company called Elixir Group which in turn is a wholly owned subsidiary of Melco International according to the latter’s interim annual report for 2009.

Elixir Group is in its turn the majority shareholder of Elixir Gaming Technologies Inc., (EGT) a company specialising in providing slot machines to hotels and clubs in East and Southeast Asia. In a statement to the New York Stock Exchange on 13th January this year, Melco Group said it owned a 39.84 percent stake in EGT.

The reason for Melco selling its interest in Melco International was not given in the company’s statement to the Hong Kong stock exchange.

The US-based Courthouse News Service reported in late March that four US-based hedge funds were planning to sue Elixir Gaming Technologies for “misleading statements to inflate its share price” and for “abandoning an established and valuable business” in US casinos to lease out slot machines in Asia.

Prime Mover Capital Partners and three Strata Funds, all Delaware-based hedge funds, say they invested millions in Elixir.

After EGT took control of Nevada-based VendingData in 2006, the complainants say the management steered the company away from its profitable business of supplying card-shuffling machines and radio frequency identification chips to US casinos.

The hedge funds say EGT exaggerated the profitability of its new business involving the lease of slot machines to Asian slot clubs and casinos. The complainants say EGT falsely claimed it would place 5,530 new model slot machines in multiple venues in Asia, each of which would generate USD125 daily. The investors allege EGT must have known at the time it could not support this assertion.

Last week the South China Morning Post reported that a US Federal Court in Manhattan was set to hold an initial pre-trial conference in May in the civil case, with EGT, Melco International and its chairman and chief executive Lawrence Ho and 14 other directors and employees of EGT named as defendants.

The SCMP said the shareholders’ suit alleges that Melco acquired majority control of Elixir in 2007 “through fraudulent and otherwise improper means”, and that the defendants “engaged in a scheme to deceive the market and a course of conduct that artificially inflated the price of the company’s common stock and operated as a fraud or deceit upon plaintiffs and purchasers” of Elixir’s shares.

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The IAG Newsdesk team comprises some of the most experienced journalists in the Asian gaming industry. Offering a broad range of expertise, their decades of combined know-how spans multiple countries across a variety of topics.

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