Investors are concern on the financial impact that Disney and Fox to halt theme park venture in Genting Highlands
By DASHVEENJIT KAUR / Pic By BLOOMBERG
SHARES of Genting Malaysia Bhd (GENM) and parent, Genting Bhd, tanked to an eight and 10-year low respectively, as investors became concerned about the financial impact Genting Group faces from the decision by Walt Disney Co (Disney) and 21st Century Fox Inc (Fox) of not to proceed with the theme park venture in Genting Highlands.
GENM’s shares plummeted 60 sen or 16.7% to RM3 yesterday, while Genting fell 52 sen or 7.5% to RM6.38 on the news.
“After the punitively high casino tax and increased licence fees imposed on GENM in the recently announced Budget 2019, this serves as another significant negative development for the group,” AllianceBDS Research noted in a report yesterday.
The research outfit noted it would not be surprised if the commencement of the outdoor theme park is delayed further as GENM seeks other global partners to license characters for its theme park.
“There could also be additional costs incurred to redesign the outdoor theme park, due to the termination of collaboration with Fox.”
“We have estimated visitations to grow from 24 million in 2017 to 31 million in 2020. The delay in opening of outdoor theme park could result in downside risks to our estimates,” AllianceDBS added.
The 20th Century Fox World theme park was intended to be one of the key attractions of its Genting Integrated Tourism Plan and this news has the potential to impact earnings of the group.
GENM has filed a lawsuit in the Central California District Court for alleged breach of contract by Disney and Fox.
The project became a casualty of the Disney-Fox merger, with GENM accusing the companies of trying to pull out from an agreement to sponsor a Fox World theme park.
Fox has decided to terminate the memorandum of agreement (MoA) on the theme park and claimed US$46.2 million (RM193.6 million) in accelerated payments.
GENM, in its exchange filing yesterday, noted Fox had no grounds to terminate the MoA and has pursued cause of action for breach of contract, and breach of the implied covenant of good faith and fair dealing, among others. The local gambling operator has also pursued cause of action against Disney and Fox for inducing breach of contract and for interference with contract.
“GENM intends to fully enforce its rights under the MoA, claim for the cost of its investments, and consequential and punitive damages that in total will exceed US$1 billion and such other reliefs to be determined by the court,” it said.
GENM is looking to recoup more than US$750 million invested in the park, as well as punitive and other damages.
The company claimed the fallout was due to Disney not wanting to be associated with its gambling business as the Hollywood giant moves to finalise its acquisition of Fox’s entertainment assets.
“Fox was pressured to terminate the agreement by its soonto- be owner Disney as it wanted no association with a gaming company like GENM due to Disney’s ‘family-friendly’ brand strategy,” the lawsuit in the Los Angeles read.
GENM alleged in its complaint that it promised to pay Fox annual licence fees and royalties, with an understanding Fox would start receiving payments only after the park is launched.
GENM had accused Fox for leveraging its approval rights to amend the deal and start receiving annual fees and royalties immediately.
The lawsuit also alleged that Fox was largely responsible for the park’s delays.
It claimed Fox missed its own deadlines for issuing approvals, backtracked on the approvals it did give and failed to provide guidelines for its intellectual property, such as how the Fox logo should appear on the park’s entrance.
The park was initially slated to open in 2016, but it was met with several delays.
GENM, as the developer, now hopes to open it in the first half of 2019.
The group also operates the Genting Highlands Resort, which includes a casino, seven hotels, a shopping mall and other attractions.