By Kate O’Keeffe and Cris Larano, DOW JONES NEWSWIRES
MANILA (Dow Jones)–Japanese gambling magnate Kazuo Okada’s Universal Entertainment Corp. (6425.OK) broke ground Thursday on a $2 billion casino resort in an area the Philippine government hopes will become Manila’s answer to the Las Vegas Strip.
The project is also at the center of a battle between Okada and his longtime business associate, Wynn Resorts Ltd. (WYNN) Chairman Steve Wynn.
Okada, chairman of pachinko maker Universal Entertainment and also the largest shareholder of Wynn Resorts, filed a lawsuit in Nevada earlier this month alleging he was blocked by Mr. Wynn from seeing the company’s financial records after he objected to a $135 million donation to the University of Macau. The suit came as a surprise and revealed turmoil at a company that was viewed by many investors as the most stable in the industry.
Wynn Resorts, which has properties in Las Vegas and Macau, fired back calling the suit “preposterous” and an attempt to deflect attention from a dispute between Okada and Wynn’s board of directors over Okada’s decision to directly compete with the company in the Philippines. Okada then said in a regulatory filing that he proposed three candidates for election to the board at Wynn’s 2012 shareholder meeting and a fourth nominee if Mr. Wynn’s ex-wife Elaine doesn’t stand for re-election.
Union Gaming Group analyst Bill Lerner wrote in a report that Okada’s goal in the dispute could be to get access to his locked up shares in Wynn Resorts so that he can fund projects such as the Manila Bay resort. Wynn and Okada earlier promised they wouldn’t sell shares to anybody without the other’s permission, according to a description of a stock agreement by Mr. Wynn in 2008. But following a divorce from his ex-wife Elaine, Mr. Wynn was left with just around 9% of the company and Mr. Okada with more than twice as much, according to the suit.
Okada said Thursday the company can source funding requirements for the Manila project internally but that it would welcome local partners to develop the resort, which will be completed in late 2014 and include three hotels, a convention hall, a glass-domed man-made beach, and villas on a 45-hectare complex. Universal Entertainment already has $1 billion in cash earmarked for the project and is formulating a plan to finance the remaining $1 billion, which could involve loans, said Universal Entertainment Assistant General Manager Nobuyuki Horiuchi.
Universal Entertainment and three other groups–Bloomberry Resorts and Hotels Inc., Belle Corp. (BEL.PH), and a joint venture between Alliance Global Group Inc. (AGI.PH) and Genting Hong Kong Ltd. (0678.HK)–have been chosen by the Philippines’ gambling regulator to develop casino resorts in the Manila Bay area, which officials hope will put the country’s casino industry on the map.
“In five years, we will beat Las Vegas,” Philippine Amusement & Gaming Corp., or Pagcor, Chairman Cristino Naguiat said at the groundbreaking ceremony. Pagcor, also the country’s largest casino operator, expects the resorts to generate annual gambling revenue of $10 billion-$11 billion, or nearly double the $6 billion that Las Vegas recorded in 2011, in the fifth year of its operations, he said. Pagcor will get a 25% share of the gambling revenue from the developments, in which the four operators are expected to invest a combined $5 billion, Naguiat said.
Okada said his resort will generate around 15,000 jobs and primarily cater to gamblers from China, South Korea, Japan, Singapore and Hong Kong. He said the company delayed the project, for which it got a license in 2008, because it wanted to see the result of the 2010 Philippine presidential elections.
President Benigno Aquino took office in June 2010. The previous president Gloria Macapagal-Arroyo was arrested in November on charges that she rigged the 2007 elections to favor her senatorial candidates. She is expected to plead not guilty.
Naguiat said a 10-hectare portion of the Manila Bay area is still open to interested foreign gambling groups.
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