Okada and Wynn (Courtesy Las Vegas Review-Journal)
Wynn Resorts Ltd. agreed to pay a total of USD2.4 billion to settle a lawsuit with Universal Entertainment Corp. over the forced redemption of the Japanese pachinko-machine maker’s 20 percent stake in the casino operator six years ago.
The settlement announced today [Friday, Macau time] is the latest dramatic turn since Steve Wynn resigned last month amid a sexual harassment scandal at the casino empire he founded. It adds $464 million to a $1.94 billion 10-year promissory note Wynn gave Universal in 2012 for the shares, and it puts an end to the biggest chunk of the court fight that started with the acrimonious falling out between Steve and his former business partner, Kazuo Okada.
Wynn Resorts has come under scrutiny from gaming regulators in Macau, Nevada and Massachusetts, where it is building a $2.4 billion casino resort, in the wake of reports the founder and now former chairman pressured employees into having sex with him. The settlement with Universal Entertainment may help clear a path for Steve Wynn, the company’s biggest shareholder, to sell part of his stake should that be necessary.
Okada, ousted from his Tokyo-based company last year, isn’t a party to the settlement and Wynn Resorts’ claims against him for breach of fiduciary duty remain pending. A trial on those allegations is scheduled for next month in Las Vegas and a lawyer for Okada, J. Stephen Peek, said his understanding is that the claims against his client will move forward.
In February 2012, Wynn Resorts took the Japanese billionaire’s shares, which then had a market value of about $2.7 billion, and gave him the promissory note in exchange. The company claimed Okada had put the company’s gaming licenses at risk by making illicit payments to Philippine regulators. Okada countered that he was forced out of the company because Steve Wynn perceived him as a threat to his control.
Wynn Resorts will make the $2.4 billion payment to Universal by March 31, the company said in a statement.
“Today’s outcome is tremendous for our client,” David Krakoff, a lawyer for Universal Entertainment, said in a separate statement. “It resolves long-running litigation on very favorable terms, and provides substantial resources for Universal to continue its international growth.”
Universal Entertainment shares tumbled 16 percent, their daily limit and the most in almost five years, in trading in Tokyo on Friday.
“The amount of the settlement was much smaller than expectations,” said Tomoichiro Kubota, an analyst at Matsui Securities Co. in Tokyo. “The fact that Kazuo Okada himself was not involved in the settlement left some uncertainty.”
Wynn Macau Ltd. climbed 0.5 percent in Hong Kong on Friday, while parent Wynn Resorts jumped 6.4 percent in New York on Thursday [Friday morning, Macau time] before the settlement was announced.
The settlement comes a day after Wynn Resorts unexpectedly raised its dividend, and announced one of its longer-serving board members resigned while another won’t seek re-election.
Those steps are helping to bring some stability and boost investor confidence after volatility in the company’s stock amid the controversy surrounding Steve Wynn, said Bloomberg Intelligence analyst Margaret Huang. Wynn Resorts shares fell as much as 19 percent following a Wall Street Journal article detailing the allegations of sexual harassment against Wynn.
MDT/Bloomberg
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