Shares of Caesars Entertainment soared nearly 15 percent Wednesday after Reuters reported that Houston-based billionaire Tilman Fertitta approached the company about a merger agreement.
CNBC reported the offer was $13 per share with Fertitta, who owns the Golden Nugget casino operation, taking over management of the combined company.
Caesars, which operates 49 casinos in 13 U.S. states as well as both gaming and non-gaming international holdings, emerged from a two-year-long bankruptcy reorganization a year ago, which shed more than $16 billion from the company’s $25 billion debt load. The reorganization created VICI Properties, a real estate investment trust that own 20 of Caesars’ casinos and golf courses, leasing the operations back to casino giant.
Credit Suisse gaming analyst Cameron McKnight told investors the merger “made sense” for both Fertitta and Caesars. Fertitta’s holdings include the Houston Rockets National Basketball Association franchise, which he bought last year for $2.2 billion, and restaurant and privately-held entertainment company Landry’s.
“(The) brands, and casino and restaurant assets are very complementary,” McKnight wrote. “Tilman Fertitta would be a great addition to the management team. He’s well known and liked, and (a) renowned cost cutter.”
Deutsche Bank gaming analyst Carlo Santarelli told investors any deal between Fertitta and Caesars has been “undervalued” by investors and deal “is more about control” rather than a buyout. “Multiple details” are still unanswered.
“While this deal may come together, we think, at the very least, it brings interested parties to the table and reminds investors that nonsensical valuations don’t go unnoticed within the industry,” Santarelli said.
More than 89 million shares of Caesars were traded on the Nasdaq Wednesday – six times the average daily volume. Caesars closed at $10.20, up $1.11 or 12.21 percent.
According to Reuters, Fertitta, 61, is proposing a reverse merger in which Caesars would be the acquirer, and Caesars shareholders, including private equity firms Apollo Global Management LLC and TPG Global, would remain shareholders in the combined company, sources told the news service. Bloomberg reported the deal would involve merging Golden Nugget into Caesars.
Caesars controls the Caesars, Harrah’s and Horseshoe casino brands and is one of the largest gaming operators on the Las Vegas Strip, with nine properties on or near the famous boulevard. Caesars also owns the World Series of Poker brand.
A spokesman for Caesars declined to comment on the report in an email to CDC Gaming Reports.
In August, the company saw its stock price take a steep nosedive after CEO Mark Frissora said on a quarterly conference call Caesars was expecting lower results during the third quarter due to lack of special events in Las Vegas during July and August.
Also, the New York Post reported hedge fund HG Vora Capital Management LLC had built a 4.9 percent stake in Caesars, seeking to force management to explore options that could include casino sales or an outright sale of the company.
Since emerging from bankruptcy, Caesars has focused on expansion. The company is seeking to earn one of the three expected gaming licenses in Japan and may be looking at non-gaming opportunities in Macau, where it does not have a gaming license. The company announced plans for non-gaming Caesars-branded resorts for Dubai and Mexico.
In June, Caesars closed on a $1.7 billion acquisition of two racetrack casinos in Indiana. The company is also focused on expanding its footprint into the growing legal sports betting market in the U.S., signing a deal with Scientific Games for a sports betting management system.
Caesars has also been mentioned as a possible buyer of Dan Gilbert’s Jack Entertainment, which owns casinos in Ohio and Detroit. The company’s are joint-venture partners in the Horseshoe Casino Baltimore.
Fertitta – a cousin to brothers Frank Fertitta III and Lorenzo Fertitta who control the Station Casinos operation – entered the gaming industry in 2005 when he acquired the Golden Nugget casinos in Las Vegas and Laughlin, Nevada. He expanded the brand to include Golden Nugget resorts in Atlantic City, Biloxi, Mississippi, and Lake Charles, Louisiana.
Forbes has pegged his net worth at $4.5 billion.
Shares of other casino companies, including Penn National Gaming, MGM Resorts International, Red Rock Resorts, Boyd Gaming Corp., Golden Entertainment and Wynn Resorts, all moved higher Wednesday on the Caesars’ reports, according to Seeking Alpha.
Reuters, CNBC, Bloomberg and Seeking Alpha contributed.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
