Casino operator Genting Malaysia Bhd has sold its entire 16.87% stake in cruise operator Genting Hong Kong Ltd at the lowest price permitted under the disposal mandate.
Genting Malaysia announced in a filing with Bursa Malaysia on Friday that its indirect unit, Resorts World Ltd. has agreed to dispose 1.43 billion Genting HongKong shares to Golden Hope Ltd for US$415mil (RM1.71bil) in cash, or 29 cents per Genting HongKong share.
Golden Hope – in which Genting Malaysia chairman and chief executive Lim Kok Thay is a director – already held a 47.22 percent direct stake in Genting Hong Kong prior to Friday’s purchase. The exercise is said to be completed on October 21.
The company cited “for investments and/or working capital” as the reason for Genting Hongkong’s stake sale.
“As part of its business strategy, Genting Malaysia group will from time to time identify and evaluate investment opportunities to strengthen and grow its business. However, at this point in time, the Genting Malaysia group has yet to identify any specific investment and as a result, the expected time frame for the utilization of such cash proceeds cannot be determined at this juncture,” the company said.
Genting Malaysia pointed out that the US$0.29 per share paid by Golden Hope represented an 8.2 percent premium to the volume weighted average market price of Genting HongKong shares during the five-day period ended September 29.
Under the original mandate which expired on July 1 this year, the minimum disposal price allowed had been higher, at US$0.33. But even if it is pegged at US$0.33, the sale will fail to deliver profits. The original cost of investment in the disposal shares had been US$604.1mil (RM2.49bil), or an average of US$0.42 per share.
Genting Malaysia said it had engaged placement agents to procure interest from potential investors in the shares that were up for sale.
“As at Sept 30, 2016, based on the review of the share price level of Genting HonKong, market conditions and feedback from selected investors contacted by the placement agents, the company believes that there is insufficient demand to conduct a placement of the entire number of sale shares through a widely distributed process at the minimum price of US$0.29 allowed under the 2016 disposal mandate,” it said.
