Billionaire casino moguls to play best hand, in court

Reuters News
|
Posted: Feb 08, 2012 7:48 PM
Billionaire casino moguls to play best hand, in court

By Farah Master

(Reuters) - Las Vegas tycoon Steve Wynn and his biggest investor and former best friend Kazuo Okada go head to head in court on Thursday in a case that has implications for the control of the $15 billion Wynn Resorts Ltd gaming empire.

The clash between the self-made billionaires - a Japanese businessman who made his fortune off pachinko machines and the American often credited with Las Vegas' modern-day makeover - is the culmination of a dispute that began a few months ago and that has transfixed the close-knit casino town.

Okada, who holds close to 20 percent of Wynn Resorts and is suing to gain access to financial information, objects to an "inappropriate" $135 million donation to the University of Macau.

A resident of Hong Kong who made his fortune on pachinko machines, the 69-year-old is also proposing four potential candidates for the company's board, a move that could potentially give him command of five out of 12 board seats.

For now, Wall Street appears content to watch the fight unfold from the sidelines, with the shares of Wynn Resorts and Hong Kong-listed unit Wynn Macau Ltd largely unaffected. But analysts say the highly public spat, which has already escalated to fiery rhetoric from both sides, could weigh on Wynn's stock premium over rivals such as Las Vegas Sands Corp and MGM Resorts International.

"It does affect the premium. Wynn has had a premium over Sands and other operators because it is considered to be the blue chip operator with no corporate governance issues," said Aaron Fischer, Director of Gaming and Leisure Research at the CLSA brokerage in Hong Kong.

"With this kind of suit, it would reduce the premium, but the outcome, I am not sure."

Wynn, who has snagged OJ Simpson's former lawyer Robert Shapiro to lead his case, brushes off the claims from his business partner of 12 years, calling them "hyperbole" and "half truths," and is seeking to get the case dismissed.

Okada, chairman of Universal Entertainment Corp -an arcade-game manufacturer in which Goldman Sachs Group Inc has an 11 percent interest - holds more than double the stake of Wynn held by its namesake.

FROM JUKEBOXES TO CASINOS

The falling out of the longtime friends - Wynn named a restaurant after Okada in his Macau casino - took many in the industry by surprise. The Japanese businessman helped pull Steve Wynn back from the brink after he unloaded his Mirage casino to MGM Grand a decade ago, after helping to transform sin-city Vegas into a family-friendly destination.

Okada, an engineer by training who got his start fixing jukeboxes, has one of four licenses for a casino in the Philippines that Wynn says is at the heart of their falling-out.

The $2 billion venture in the Philippines is due for completion in 2014 and will be Okada's first foray into operating a casino rather than developing and manufacturing slot and pachinko machines.

Wynn,70, the creator of such Strip icons as the erupting-volcano at the Mirage and the lavish Bellagio casino resort, brushed off Okada's lawsuit during a conference call to investors. He said his Japanese partner was "dissatisfied" after Wynn declined to work with him on his Philippines casino.

"We've always taken a very strong opinion about not wanting to give the impression that Wynn Resorts was the developer of the land that he's acquired in the Philippines," he said.

"And this has created some stress between us, unfortunately. How it ends up, I don't know."

But a source directly linked to Okada said the Philippines issue was not a factor in the lawsuit.

"HK$1 billion ($135 million) is a lot of money to donate to one university from one company. This is what Mr Okada is wondering," said the source, who declined to be identified.

Universal is also set to list in Hong Kong, but no specific date has yet been given.

HOW THINGS SOURED

Some analysts say the legal fight is unlikely to impact Wynn on an operational level.

"For now, the fight is just one big ego fighting against another big ego," said an analyst who requested anonymity because of the sensitivity of the situation.

Okada, who was worth $2.1 billion in 2011 according to Forbes, said in a filing on Monday that it was his duty as a director to inspect Wynn's books.

Wynn upset shareholders more than 12 years ago with overzealous spending, including a $200 million art collection, that ate into the profitability of his Mirage Resorts. He ultimately lost control of the Mirage to MGM Grand and its then-controlling shareholder, Kirk Kerkorian.

Ironically, it was Okada who helped bankroll Wynn's comeback, which eventually produced the signature Wynn resorts on the Strip and in Macau.

The friendship was so close that Steve Wynn proclaimed in 2008: "I love Kazuo Okada as much as any man that I've ever met in my life. He's my partner and my friend. And there is hardly anything that I won't do for him."

Now, all bets are off. ($1 = 7.753 Hong Kong Dollars)

(Additional reporting by Jonathan Gordon and Edwin Chan; editing by Andre Grenon)