Caesars Entertainment Corp. CEO Mark Frissora, who guided the Las Vegas-based casino giant during a lengthy bankruptcy reorganization but had reportedly been at odds with hedge funds that owned a large number of shares in the gaming company, said Thursday he will leave his position in February.
In a brief statement on the same day Caesars was reporting third quarter earnings, the company said four board directors and the chairman will work with a nationally recognized search firm to identify Frissora’s successor, who will remain in his current role until Feb. 8.
Frissora’s announced departure overshadowed the company’s third quarter results. Revenues grew 3 percent to $2.185 billion in the quarter that ended Sept. 30. Net income was $110 million, which reversed a net loss of $433.1 million a year ago. Earnings per share was 16 cents, compared with a loss of 62 cents per share in the 2017 third quarter.
On the quarterly earnings call Thursday afternoon, Frissora did not answer questions about his planned departure. It’s reported his contract expires next February. At the outset of the call, Frissora repeated a comment from the press release about being grateful for the company’s efforts and being optimistic about Caesars future.
In a filing with the Securities and Exchange Commission Thursday afternoon, Caesars said Frissora would be retained as a consultant for six months after Feb. 9 and will be paid $83,333 per month. Frissora will also receive a severance of $8 million, payable over 24 months, as well as a bonus and other benefits, including stock options. Caesars said it expects to record charges of $30 million in the fourth quarter related to Frissora’s departure.
Frissora, who joined Caesars in 2015 after the company entered a Chapter 11 bankruptcy reorganization, had reportedly fallen out of favor with certain large shareholders, mainly hedge funds that gained ownership when the bankruptcy was finalized a year ago. The New York Post reported in September that one hedge fund wanted to force a sale of the company.
On the second quarter earnings call in August, Frissora complained much of Caesars stock was owned “by people not in it for the long-haul.” A few weeks later, Frissora purchased nearly $1 million of the company’s stock as a vote of confidence.
Shares of Caesars, traded on the Nasdaq, were up 26 cents or 3.03 percent to close at $8.85 on Thursday. Following the Frissora and earnings announcements, shares were up more than 10 percent in after-hours trading.
Recently, Houston billionaire Tilman Fertitta, who owns the privately-held Golden Nugget casino chain, made overtures about merging his casinos with Caesars. Fertitta would take a management role with the merged company.
On Thursday, Caesars confirmed the proposal, but said in a statement it rejected the offer as “not consistent with the company’s plans to create and enhance shareholder value in the long term.”
In the statement prior to the quarterly earnings call, Frissora cited his various company growth initiatives in the past year, which resulted in an $800 million dollar increase in cash flow. Caesars acquired two Indiana racetrack casinos, launched sports betting across the company’s properties in New Jersey and Mississippi and is developing non-gaming luxury resorts in Mexico and Dubai.
“I have been privileged to lead this iconic company and am proud of all that our team has accomplished,” Frissora said in a statement. “Together, we navigated a complex restructuring process.”
On the earnings call, Frissora said Caesars would continue to explore potential acquisitions, but he would not address specifics.
“We have a very active committee that looks at all acquisitions and the process has not slowed,” he said.
The two-and-a-half-year bankruptcy reorganization sliced some $12 billion in debt from the company’s books and created VICI Properties, a real estate investment trust that owns the land and buildings associated with 20 Caesars resorts. The operations are leased back to Caesars Entertainment.
“We have improved our margins significantly and created enterprise value which enabled the successful reorganization of our Caesars Entertainment Operating Company subsidiary,” Frissora said. “I am confident that the company is well positioned to thrive and grow in the future. I am committed to maintaining stability and operating discipline during this transition.”
Caesars Board Chairman Jim Hunt said in a statement Frissora played an “instrumental role in leading the company through a challenging period and setting Caesars on a course for sustained, long-term growth and value creation.”
Frissora, 62, took over Caesars as CEO in July 2015 from Gary Loveman, who remained chairman of the company until last year.
Caesars third quarter earnings pleased analysts, who had low expectations entering the earnings call. In August, the company guided toward lower-than-anticipated results from its Las Vegas properties due to a slow summer period and a challenging comparison with 2017.
While Caesars’ Las Vegas revenues slipped 2.4 percent, the company’s revenues from outside the Strip grew 8.5 percent.
“Our take? Much better than expected, with normalized Las Vegas cash flow inline,” said Credit Suisse gaming analyst Cameron McKnight, adding the company had a strong regional performance with “revenue growth across the portfolio.”
“Bottom line, we think fourth quarter trends are strong and that a weak third quarter was a ‘perfect storm,’” McKnight added.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
