Wynn Resorts, Ltd. v. Kazuo Okada, Aruze USA, and Universal Entertainment Corp.

The Situation

In February 2012, Wynn Resorts forcibly redeemed 24.5 million of its shares held by Universal Entertainment Corporation in return for a ten-year promissory note (the “Note”) ostensibly equal to the fair market value of the shares. The Note was valued by Wynn Resorts at $1.94 billion and was based upon discounting the future cash flows to be provided by the Note at a 2% annual rate of interest, which was the annual interest rate on the Note.

NERA's Role

NERA Affiliated Consultant Dr. Andrew Carron and a team of NERA experts reviewed the valuation of the Note and inputs to that valuation, including the 2% interest rate. Even though the 2% interest rate was specified in the company’s articles of incorporation, Dr. Carron explained that its use resulted in the Note not providing a fair market value equal to its face amount. Dr. Carron examined similar public debt as well as market commentary to explain why the use of a coupon rate of 6% would provide fair market value, assuming all other aspects of the Note were appropriate.

The Result

The case settled in early 2018 with Wynn Resorts paying Universal $2.4 billion, which Wynn Resorts described in a press release as the face amount of the Note plus “6% interest over the previous six years” since the 2012 redemption.