Genting’s privatisation push falters just as New York delivers a splashy win

[KUALA LUMPUR] Genting Bhd’s bid to take Genting Malaysia (GENM) private fell short as its offer closed with just 73 per cent acceptances on Monday (Dec 1) – a rather muted outcome that landed on the very day its US unit secured one of New York’s highly coveted full-casino licences.

The coincidence sharpened a point some analysts had already made: that the offer price underplayed GENM’s future prospects, particularly the value of a potential New York licence, alongside other catalysts such as overseas expansion, asset revaluations and non-gaming divestments.

Genting’s stake in GENM upon the closure of its mandatory general offer is short of the 75 per cent needed to take the company private, leaving its listing status intact.

In a Bursa filing, Genting said that as at 5 pm on Dec 1, it held a 73.133 per cent interest in GENM, with another 0.202 per cent in acceptances yet to be vetted, ending a privatisation attempt that had stirred intense debate among minority shareholders since its launch on Oct 13.

Genting had extended the voluntary takeover offer to Dec 1 from Nov 24 after it managed to increase its stake to only 57.008 per cent by Nov 13, from close to 50 per cent at the start of the exercise.

Kenneth Leong, head of research at Berjaya Securities, reckoned there was only a slim possibility of a renewed sweetened privatisation in the near term, but noted that any future takeover proposal would require a significantly higher premium following the muted response to the recent offer.

“Furthermore, the company’s fragmented shareholder base will complicate any immediate plans for a new takeover offer,” he told The Business Times.

Tradeview Capital portfolio manager Neoh Jia Man said that the unattractive offer price – about 10 per cent above the last traded price prior to the launch of the offer – was the main reason many minority shareholders rejected the deal.

“The offer was particularly unappealing for long-term shareholders whose entry costs were often significantly higher than the bid price, due to prolonged share-price underperformance. Consequently, many shareholders felt the proposal failed to adequately reflect GENM’s intrinsic value,” he added.

Under Malaysian takeover rules, an offeror whose bid has lapsed is restricted from acquiring more than 2 per cent of a target’s shares for 12 months unless granted a waiver.

While Genting technically needs only 1.87 per cent more to reach the 75 per cent threshold for delisting, the cap constrains its ability to accumulate that stake through open-market purchases, especially if minority shareholders hold out for a higher price, said an analyst.

New York, New York

The New York Gaming Facility Location Board has approved all three available full-casino licences, including the bid from Genting Malaysia subsidiary, Genting New York’s Resorts World New York City (RWNYC).

Apart from RWNYC, the two other winning proposals were from Bally Corporation and Queens Future, a joint venture between Steve Cohen, the owner of Major League Baseball team the New York Mets, and Hard Rock International.

The New York State Gaming Commission is now expected to formally issue the licences by the end of this month. This also marks the end of a multi-year contest that originally drew eight contenders.

Despite the positive news flow from New York, GENM’s share price weakened after trading resumed at 10 am on Tuesday. The stock closed more than 4 per cent lower at RM2.25, while Genting fell 2 per cent to RM3.29.

Berjaya’s Leong believes GENM still offers potential upside. “At its current share price, the stock is trading at a price-to-book multiple of 1.07 times, below its historical average of 1.2 times,” he said.

Neoh noted that retaining the company as a listed entity is preferable to a privatised structure as regulatory oversight, mandatory disclosures, and market scrutiny provide a stronger framework for safeguarding minority rights.

Looking ahead, Neoh expects GENM to potentially undertake an asset restructuring exercise to help unlock value for shareholders.

It’s heating up

The group, controlled by billionaire Lim Kok Thay, is intensifying its overseas expansion as Genting Malaysia faces a more challenging operating environment in Malaysia and intensifying gaming competition across Asia.

From a single casino built on a jungle hilltop in 1971 by founder Lim Goh Tong, Genting has evolved into a global gaming operator and is now positioning itself to tap one of the world’s most lucrative casino markets through New York.

Kenanga Investment Bank had anticipated GENM’s success in the bidding and had already factored in RM1 per share valuation from the licence win into its target price. It maintained its 2026 target price of RM3 for GENM and kept its “outperform” rating on the stock.

Kenanga analyst Khoo Teng Chuan is positive on the licence award and expects RWNYC to begin offering 200 live table games by July 2026, possibly as early as March or April, followed by another 200 tables in early 2027. By the first quarter of 2029, the casino is expected to operate up to 800 tables and 6,000 slot machines.

Sitting on a 29.5 hectare (ha) site next to John F Kennedy International Airport, RWNYC is also targeting international travellers.

The development plans include expanding hotel capacity from 400 to 2,000 rooms, as well as adding more dining and entertainment options. RWNYC is aiming to attract between 11 million and 15 million visitors annually.

RWNYC is expected to be the sole full-service casino in New York City for three to four years, said Khoo, noting that MGM Resorts, the other incumbent and a bidding favourite, unexpectedly exited the race on Oct 15.

MGM will continue to offer only video lottery terminals (VLTs) at its Yonkers-based Empire City Casino but will not operate live table games. Based on past New York State and Nevada gaming data, live casino tables can generate nine to 12 times more revenue than a VLT.

The two other winning projects – Hard Rock Metropolitan Park and Bally’s Bronx – are greenfield developments, with their casinos expected to open only around 2030. Until then, RWNYC will remain New York City’s only full-service casino.

High capex and funding

The New York casino project’s estimated capital expenditure ranges between US$4 billion and US$5 billion. Kenanga previously estimated a funding gap of US$2 billion to US$3 billion.

“However, following MGM’s exit and stronger earnings prospects from being New York City’s only full-service casino until around 2030, the gap is now expected to narrow to about US$1 billion to US$2 billion,” said Khoo in a note on Tuesday.

Initial concerns over substantial equity dilution have therefore eased, he added. GENM also owns about 6 ha of land in Miami, which it nearly sold for US$1.2 billion, as well as 270 million treasury shares valued at between US$100 million and US$200 million, depending on the selling price.

He noted that with Genting Bhd now holding 73 per cent of GENM, the company can also issue up to 10 per cent of new shares without triggering a rights issue, potentially raising an additional US$300 million to US$400 million.