Gaming equipment provider Scientific Games Corp. (SG) and one of its shareholders are playing a game of litigation tennis. SG sued Sylebra Capital Partners, one of its largest shareholders, in June and it’s now Sylebra’s turn. The company has filed its own suit against SG’s board and its chairman, Ronald Perelman.
SG sued Sylebra a few months ago in order to force the company to reveal corporate data as it sought a gaming license in Nevada. The hedge fund has reportedly not disclosed any information for two years and has been under investigation by gaming regulators in several jurisdictions around the world and has questionable ties to a Russia-based entity that has unconfirmed links to terrorist organizations. The company controls around 9.8% of SG’s stock.
The Hong Kong-based shareholder argues in its suit that SG’s board and, specifically, Perelman, are in violation of their fiduciary responsibilities. The company released a press release late last week in which it indicated that it had filed the lawsuit with the US District Court of Delaware, adding, “Perelman and his hand-picked board have inflicted more than US$290 million in damages by spreading malicious and misleading claims about Sylebra.”
The lawsuit further asserts, “Perelman’s goal is to force Sylebra out of Scientific Games by using unique provisions of the gaming company’s charter that would deem Sylebra an unsuitable investor. He could then forcibly redeem Sylebra’s shares at a deeply discounted price to further solidify control over Scientific Games.” Sylebra alleges that Perelman is “abusing his power” and that the board is helping him do it, adding that they are wasting company resources in the process.
Sylebra Chief Investment Officer Dan Gibson states, “Ron Perelman’s … goal is clear – to force Sylebra out of Scientific Games and confiscate our legitimate profits … This lawsuit aims to protect our investors and seek compensation for the losses inflicted on us. “We are confident that a court of law will determine that Perelman and the board have breached fiduciary duty to strengthen control at the expense of Sylebra and other minority shareholders.”
SG isn’t as sure as Sylebra that the lawsuit will succeed. The company’s VP for corporate communications, Susan Cartwright, told GGRAsia, “In response to Scientific Games’ efforts to ensure integrity and transparency, which is required by U.S. regulators, Sylebra has sued to distract from the basic and obvious fact – Sylebra has simply not provided plain vanilla information which would resolve this dispute as well as the lawsuit Scientific Games filed against Sylebra months ago.”