PETALING JAYA - The opening of a new theme park based on the 20th Century Fox World design is supposed to boost the number of visitors to Genting Highlands for the next two years from June 2019.
However, it is not going to happen - sparking a setback for Genting Malaysia Bhd in its efforts to boost visitor numbers.
Shares in Genting Malaysia took a heavy beating yesterday as the opening of its theme park, that is under construction at Resorts World Genting, hit a snag.
This came after Genting Malaysia said it had filed legal suits against 21st Century Fox Inc and Walt Disney Co for pulling out of an agreement to allow the group to build a theme park using the design and intellectual property rights owned by Fox Entertainment Group, LLC.
The RM4.5 billion (S$1.47 billion) 20th Century Fox World theme park was supposed to have been completed by the end of last year, but the opening was pushed back to the middle of next year.
"Without the theme park, it is uncertain what the catalyst would be to increase the number of visitors to Genting Highlands. This is important for Genting Malaysia as it is the operator of the theme park," said an analyst, adding that the company is expected to shed some light on the matter by the end of the week.
In a filing with Bursa Malaysia yesterday, Genting Malaysia said it was claiming more than US$1billion (S$1.37 billion) for the cost of its investments, as well as consequential and punitive damages.
Shares in Genting Malaysia plunged 60 sen or 16.7 per cent to close at RM3, wiping out RM3.4bil from its market capitalisation.
The counter topped the volume list with 276.3 million shares changing hands.
The impact was also felt at the parent company level - Genting Bhd - that saw its share price falling 52 sen or 7.5 per cent to close at RM6.38.
Reuters, quoting the case file, reported that Disney wanted to end the contract because associating with a gaming company did not fit its "family-friendly" brand strategy.
Disney won the fight to take control of a large chunk of 21st Century Fox's entertainment and media assets for US$71.3bil two months ago.
This included the 20th Century Fox film and TV studio, which owns the intellectual rights to the design of the theme park.
Disney's takeover of 21st Century Fox's assets is expected to be completed in the first quarter of 2019.
Genting said Fox issued a default notice with the hope of terminating the contract, in a manner "entirely consistent with Disney wanting to kill the deal" to benefit itself.
"Given that Fox Entertainment Group had no right to terminate the agreement, Fox and Disney are liable for what will exceed US$1bil in damages attributable to the bad-faith behaviour of both Fox and Disney," it said.
The filing also revealed that Genting had already made a "US$750 million-plus" investment in the Fox World.
Genting Malaysia entered into a licensing agreement with Fox in 2013 for the development of what would be the first Fox-branded theme park in the world.
Under the agreement, Genting Malaysia was granted a licence to utilise certain intellectual property rights associated with Fox theatrical motion pictures in the design, development, construction and operation of the theme park under the Genting integrated tourism plan.
Analysts have started to take into consideration the delays in the opening of the theme park.
"Due to potential legal complications, we are concerned if Genting Malaysia could still open the theme park in the first-half of 2019," CIMB Research said in a report yesterday.
AllianceDBS Research reckoned that Genting Malaysia may seek other global partners to license the characters for its theme park.
"There could also be additional costs incurred to redesign the outdoor theme park due to the termination of the collaboration," it said.
It is worth noting that Genting Malaysia's share price has been under pressure since the beginning of the month after the government announced its decision to increase the casino tax.
The counter's market capitalisation has been erased by RM8 billion since early this month. On a year-to-date basis, Genting Malaysia has declined more than 46 per cent to RM3.
The decline in Genting-related stocks weighed heavily on local benchmark index FBM KLCI performance yesterday.