Genting Bhd has wasted no time in resuming the on-market purchase of shares in its subsidiary, Genting Malaysia, following the closure of its mandatory takeover offer earlier this week.
In a filing to the Malaysia bourse on Thursday, Genting Malaysia revealed that its parent now owns 73.798% of issued shares – up from 73.13% when the offer closed on Monday. The increased holding was achieved through open market purchases.
As previously reported by IAG, Malaysian listing rules prevent companies from purchasing any more than 2% of another listed company in the 12 months following a lapsed offer. However, Genting Bhd needed to acquire only 1.87% more following closure of its offer to reach 75% ownership – the level at which it can move to privatize Genting Malaysia.
Investment bank Nomura explained in a recent note that should Genting achieve its 75% target, it would have to convene a shareholder meeting and make a reasonable cash or alternative offer to the remaining holders. There is also no guarantee this would be successful because if minority shareholders are not satisfied, the delisting bid can be defeated should more than 10% of shareholders object.
In another note published overnight, Nomura’s Tushar Mohata and Alpa Aggarwal said, “We have not been able to confirm with management on whether they will continue buying more, and if yes, do they intend to submit a delisting application as soon as the holding reaches 75%.”
In an interesting aside, Genting Malaysia’s share price has defied positive expectations in the days since it was recommended by New York’s Gaming Facility Location Board (GFLB) to be awarded a full commercial casino license for its Resorts World New York City property, with the share price falling 7.7% below Genting Bhd’s MYR2.35 offer price.
Nomura considers that the surprise decline could be linked to comments by the GFLB that it does not support a request by Genting Malaysia to lower the gaming taxes it pays at its full New York casino to be in line with the other successful bidders – below the industry leading tax rates it included in its proposal of 56% on slots and 30% on tables. Competitors offered no more than 25% and 10% respectively.
There is also concern over possible credit downgrades linked to Genting Bhd’s acquisition of a controlling stake in Genting Malaysia in recent months, and of “stop-loss selling” by shareholders when the share price didn’t immediately jump upon the New York announcement.
Nevertheless, Nomura has maintain its “Buy” rating on Genting Malaysia shares with a target price of MYR2.70.
“We think that the previous offer price at MYR2.35 did not capture any upside from the New York license, and the remaining holders should be ideally offered a higher exit offer in case a delisting is attempted,” the analysts wrote.
“While we acknowledge that there are liquidity risks in the picture now, we think the license win provides Genting Malaysia with a significant first-mover advantage in New York, with the ability to commence operations by June 2026 – four years ahead of greenfield competitors – which ideally should deserve a premium to the current share price.”
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