Can you give us an update on your SPAC’s (26 Capital Acquisition) attempts to take Universal Entertainment public?
There is a commitment from both 26 Capital and Universal Entertainment to close this transaction; this hasn’t changed despite some difficulties. So recently we announced a one-year extension to get the deal done – not that we’ll need a year – but the markets felt there was a risk that the merger wouldn't close.
So we’re working with Universal Entertainment on two fronts right now, one of which is to complete the audit of the financial statements from the time that Kazuo Okada took over the Okada Manila until now. That seems to be going well and smoothly, and something I believe shall be done by the end of November 2022.
The next step is a regulatory filing that’s done with the SEC that provides updated information about the merger. Once we’ve completed all this and it’s been declared effective then we can call a shareholder vote and move toward closing.
We were pretty much there and had things closed at the end of May 2022, but then the building was taken over by Okada and it couldn’t get done. But to use an American football phrase, we’re on the one-yard line and working well with various teams at the Okada Manila and in Tokyo – where Universal Entertainment is headquartered.
Kazuo Okada’s takeover caused problems back in May 2022 for this merger, can you see more problems arising with Okada destined for the courts?
There are a couple of things to consider here. One is that Kazuo Okada was arrested just a couple of weeks ago and his arraignment was last week. I do have faith in the Philippine judicial system and that trial will be ongoing for an unknown length of time. The issue with Kazuo Okada was never an ownership issue.
Universal Entertainment owns over 4 billion shares of stock in TRLEI whereas Kazuo Okada has just one share. One share vs 4 billion? This has never been an ownership issue but a management dispute. One thing for sure is that this whole debacle has not been good for the Philippines’ gaming market and is something I believe the Philippine Government and Philippine Amusement and Gaming Corporation (PAGCOR) want to see resolved.
The Philippine Government is very focused on growth in the hospitality, tourism, gaming, lodging and leisure industries in Manila. With that objective in mind, the Philippines Government wants to see foreign capital come into the market. So what’s happened with Kazuo Okada is bad – it damages that aim. It’s a series of events that I can’t believe the Government supports or endorses in any way. In addition, PAGCOR aims to act with a high level of integrity, and its objective as a regulator is to have a reputation comparable to Nevada or New Jersey, which are platinum-standard markets in the US.
“The Kazuo Okada saga has unfortunately overshadowed what has otherwise been an incredible story for the industry in the Philippines. Business trends in Manila have been extraordinary”
Jason Ader, 26 Capital Acquisition Corp
To maintain its integrity, will PAGCOR do all it can to end this saga?
These facts alone point towards an eventual resolution, and I do think justice will prevail. In the end, what’s happened over the last year has unfortunately overshadowed what has otherwise been an incredible story for the industry in the Philippines. Business trends in Manila have been extraordinary. Table gameplay is above peak levels, slot play is above peak levels, travel and tourism to and from the Philippines have been far ahead of expectations, room prices are back to peak levels and there are no Covid-19 restrictions.
Just a few weeks ago, I was in Japan walking the streets in Ginza. Other than a few tourists, everyone on the street was wearing a mask. This is just an example of the high Covid restrictions that persist in Asia, but the Philippines has been open. This has been to the benefit of the market in terms of profits and business trends, and I only expect that to accelerate as we see Covid restrictions lift almost everywhere bar China. And when China opens, that will of course be a bonus to business in the Philippines.
Does the drama highlight flaws in the Philippines' legal and regulatory setup? And, with PAGCOR debating its operating duties, what do you think will happen should PAGCOR give up its 38 casinos?
One thing that stood out to me a few weeks ago was when Ferdinand Marcos Jr (Philippines President) gave a speech, in which he said the tourism and leisure industry was the highest driver for economic transformation. Think about that. Most of the country’s tourism income originates from gaming in Manila. Marcos used the word driver, and his goal is to make sure the Philippines uses the industry to bring jobs, people and visitors to the country.
This outlook, and the intentions of the Government, are very positive for Okada Manila and the Manila gaming industry at large. It’s also great for labour markets – and those skilled in gaming – and it will be good for bringing more executives into the country. From this perspective, the Philippines is even more exciting than I could imagine. In 2021, when 26 Capital and Universal Entertainment announced the transaction to take UE Resorts International (the holding company of Okada Manila) public, it was still the pandemic, and there were restrictions meaning capacities could only be at 25%. There were still masks, etc. These issues have more than offset the Kazuo Okada issue, so his story is one that simply overshadows the positives which have happened over the past year.
As a detriment to the Philippines, do you think Kazuo Okada should stop his legal challenges and accept his punishment/position?
He’s an 80-year-old man who’s pushing a personal objective. He hasn’t shown up to any board meetings since he was issued the SQAO. At most he owned one share in Universal Entertainment, and his own son has come out against his activities. His son, Tomohiro Okada, is the controlling shareholder for the Okada family in Universal Entertainment – he owns the Okada shares, and he is 100% against the actions of his father.