Donaco settles legal proceeds with Thai businessman
Australian-listed boutique casino group Donaco International announced that it has officially settled various legal proceedings with a group headed by the prominent Thai businessman and politician Somboon Sukjaeroenkraisri.
The Thai group also includes SOmboon’s two sons, Lee Bug Huy and Lee Bug Tong.
The settlement reached finalises proceedings in Singapore, Australia, Thailand and Cambodia relating from Donaco’s acquisition of the Star Vegas casino located in the Cambodian-Thai border town of Poipet, according to an Australia Securities Exchange release distributed by the board of directors.
Khmer Times reports the release stated the two parties reached a settlement that amended the perpetual lease agreement, granting Donaco security of tenure over the casino until year 2115.
In return, Donaco will receive $38 million to remove the non-competition and non-solicitation clauses in the share sale agreement, pay $18 million to settle the claims for unpaid managements fees (plus interest) and pay any outstanding rent and an additional lease payment of $20 million to Lee Hoe Property.
The Thai group has also agreed not to dispose of any Donaco shares for a period of six months from the date of settlement.
Somboon Sukcharoenkraisri currently holds 148,199,529 shares, 17.99 per cent of Donaco.
The Thai group said the share sale agreement will be amended to acknowledge the existence of the competing casino constructed near the Star Vegas casino, the cessation of all legal actions and mutual releases and the management agreement will be terminated.
Chairman of Donaco, Mel Ashton, said: “We have reached a pragmatic and fair settlement of this long-running dispute, in what we believe is a timely manner.
“Most importantly, the remaining value of the Star Vegas business is retained for shareholders, and we do not expect any changes to the carrying value of the asset as a result of this settlement.
He added: “This gives us the stable platform we need to press forward on our other two key priorities for shareholders.”
The settlement reached provides certainty of tenure for the Star Vegas business and will conclude all disputes between the parties.
It will also allow the company and management to now focus on the forward momentum of the profitable Star Vegas business and continued improvements to the company’s balance sheet and financial position ahead of any Covid-19 effects on second half revenue and earnings, the ASX release stated.
Donaco bought Star Vegas from Somboon’s group for $360 million, five years ago.
Under the deal, Somboon retained management of Star Vegas.
In return, he received 120 million shares and $60 million annual earnings before interest, taxes, depreciation and amortisation.
Legal issues started when Donaco decided not to extend the management deal in 2017 after accusing Somboon of building two casinos nearby in violation of the non-compete clause of the sale agreement.
Donaco forges new path
Donaco International has spent the past couple of months shuffling around its board of directors and top brass.
Calvin Ayre reported in February that the Australian-listed casino company saw General Counsel Ben Reichel announce that he would step away from the board room at the beginning of December, just six days before David Green and Yugo Kinoshita also departed.
Next to go was chief executive officer Paul Arbuckle, right on the heels of these previous exits.
Donaco is now in the rebuilding phase, first bringing onboard new non-executive board members Mel Ashton and Simon Vertullo, and, now promoting two members of the board to executive members.
Leo Chan and Kurkye Wong are part of Argyle Street Management, which purchased a 19.25 per cent stake in Donaco in July last year through its subsidiary, On Nut Road Ltd.
Both Chan and Wong were added to the board, in non-executive roles, just after that purchase was consummated and despite Donaco’s initial determination that the amount of the stake was only good for one spot on the board.
The appointments come with some new perks.
According to a filing with the Australian Securities Exchange, Donaco indicates that the two will be involved in “legal, operational and financial matters” and adds, “Each of Mr Chan and Mr Wong has signed an employment contract, and will be paid a salary of A$200,000, which incorporates their existing fees in their current roles as Directors.”
The two newly appointed Donaco executives are on the board of ASM as well.
Mr Chan is an executive director at the company and comes with a solid background dating back more than 13 years in the Asian investment market.
Mr Wong is ASM’s vice president and also has a strong background in finance investment.
Both can thank Joey Lim for getting to where they are today.
The Donaco founder and former chief executive officer didn’t do a good job of managing the books, ultimately defaulting on a loan offered by Orchard Capital partners.
That allowed Orchard to step in and purchase his 27.5 per cent stake, which was then sold to ASM.
Things are finally beginning to turn around for the casino operator though.
Revenue was less than stellar last year, but 2020 is bringing with it a lot of positive change, including a possible resolution to an ongoing legal battle across several fronts, and the new board and hierarchy structures should help bring new life into the company.