Tokyo-based Universal Entertainment Corp. (UEC) is plotting its re-entry into the U.S. slot machine market, forming a Nevada-based business dedicated to equipment manufacturing and supply.
On Friday (Sept. 11), the UEC Board of Directors approved an agreement between the company and a new entity called UDN Gaming, Inc. (UDN). Universal says UDN has been formed for the purposes of manufacturing and selling gaming equipment, including slot machines, overseas.
Under the deal terms, UEC subsidiary Aruze USA will extend a credit facility of up to $25 million to UDN at 5.12% interest through 2035, with UDN pledging all of its issued shares as collateral.
UDN is currently 100% owned and controlled by UEC President Tomohiro Okada. Tomohiro is the estranged son of Kazuo Okada, the founder and former chairman of UEC. Because the loan is a related-party transaction, Tomohiro recused himself from the board’s vote, and UEC engaged outside legal counsel and independent advisors to evaluate the terms.
Tomohiro led the ousting of his father from UEC and Okada Manila, the company’s lone casino resort, in 2022. The elder Okada told Casino.org that a “coup” in the boardroom at “the hands of criminals” led to his forcible exit.
Universal Benefit
An investor release from Universal Entertainment says UDN, while owned singularly by Okada, would benefit UEC through the loan interest and ongoing intellectual property and support services fees.
Universal, which was founded by the elder Okada as a pachinko manufacturing business in the late 1960s, is today one of the leading gaming manufacturers of pachinko, slots, and arcade machines in Asia.
Under the terms, UDN would utilize Universal’s intellectual property and pay UEC $100 per gaming unit sold in perpetuity. UDN would additionally pay Universal for engineering, accounting, and administration support services at a 6% markup.
Once up and running, UDN would eventually be consolidated with Universal. The purpose of forming UDN as a separate entity from Universal is to streamline the gaming licensing process in Nevada, a suitability review that could take many months or years.
In the United States, which has a large market scale, and particularly in the State of Nevada, gaming license reviews are among the most stringent in the world. If UEC applies directly, suitability reviews of major shareholders, directors, key employees, and other relevant persons are expected to require a considerable amount of time,” the Universal Entertainment investor release read.
“As of today, the UEC group does not hold any voting rights in UDN for its own account. Tomohiro Okada, who qualifies as a person closely related to UEC in his capacity as UEC’s representative director and president, holds all voting rights of UDN,” the release continued.
The license review could still take considerable time, as Universal Entertainment has been mired in controversy for years.
Along with the forcible ousting of Kazuo Okada on claims that he was stealing from the company, UEC unsuccessfully tried to list Okada Manila on the Nasdaq through a merger with SpringOwl Asset Management’s Jason Ader. The deal fell apart amid legal chaos, with the hedge fund that brokered the deal ultimately suing UEC on allegations of breach of contract, fraud, and tortious interference.
New Revenue Needed
UEC leadership framed the North American slot expansion as a necessary strategy to generate a new revenue base alongside its domestic Japanese pachinko operations and Okada Manila.
“Amid changes in the business environment surrounding its existing businesses, including the downward trend in the domestic amusement equipment market and intensifying competition in the Integrated Resort (IR) Business in the Philippines, UEC recognizes that it is important to promptly establish a new revenue base in order to achieve sustainable growth,” the notice read.
The post Universal Entertainment Bets on Nevada Slot Machine Business appeared first on Casino.org.
Rephrased by The Mystic Gambler