Caesars Entertainment announced Thursday that it entered into an agreement to be acquired privately by billionaire Tilman Fertitta and his Fertitta Entertainment in an all-cash transaction valued at $17.6 billion.
In the deal, which includes a “go-shop” period for Caesars through July 11 to consider other offers, Fertitta will assume $11.9 billion of Caesars’s outstanding debt.
“Fertitta Entertainment brings a proven operating model with a track record of successfully integrating and growing leading hospitality and entertainment businesses,” Caesars said in a statement released this morning. “The transaction positions Caesars to continue executing on the strategy that has made it the leading casino-entertainment company in the United States. Together, Caesars and Fertitta Entertainment have a shared commitment to operational excellence, customer service, and disciplined growth, with employees and guests remaining at the heart of the business.”
Caesars Chief Executive Officer Tom Reeg, Chief Financial Officer Bret Yunker, President and Chief Operating Officer Anthony Carano, and other members of the corporate and property-level management teams are expected to remain in their roles and continue to lead operations at the combined company, the statement said.
“The leadership teams of both companies are all expected to remain in their current roles and continue to lead the combined companies’ operations,” Fertitta Entertainment said in a statement. “This continuity reflects our confidence in the leadership teams that have built both companies … and our commitment to preserving the operational momentum and guest-focused culture they both have cultivated.”
“The combination of Caesars and Fertitta Entertainment brings together two iconic and highly complementary platforms to create a dynamic suite of gaming, entertainment, and restaurant brands,” the statement said. “The combined company will offer guests an even broader array of destinations and experiences, all connected by the Caesars Rewards loyalty network.”
Fertitta Entertainment released its own statement .
“Fertitta Entertainment’s agreement to acquire Caesars Entertainment brings together two of the world’s premier hospitality and gaming companies. … Caesars is one of the leading casino entertainment companies in the United States. … Fertitta Entertainment brings a proven operating model and a decades-long track record of successfully integrating and growing market-leading hospitality and entertainment businesses. …”
Under the terms of the agreement, Caesars shareholders will receive $31 in cash for each outstanding Caesars share. The consideration represents a 49% premium over Caesars’s unaffected share price as of February 25, the last trading day before rumors of a potential transaction emerged. It’s also a 46% premium over the unaffected 30-day volume-weighted average price as of the same date.
“The Board of Directors of Caesars Entertainment has approved the transaction and recommends that Caesars shareholders adopt and approve the merger agreement,” a company statement said. “The Board, after detailed consideration with the assistance of its outside financial and legal advisors, determined that the immediate cash premium offered by this transaction is compelling for Caesars shareholders, and its approval of this transaction underscores its commitment to drive and deliver value for shareholders.”
The transaction is subject to the approval of Caesars Entertainment shareholders and the satisfaction of customary closing conditions, including applicable regulatory approvals. In addition, the Carano family, which owns approximately 5% of the outstanding shares of Caesars Entertainment common stock, has agreed to roll a portion of their equity interests into Fertitta Entertainment. Upon completion of the transaction, shares of Caesars Entertainment common stock will no longer be listed on NASDAQ, the company said.
During the go-shop period, Caesars and its financial and legal advisors may solicit, consider, and negotiate alternative acquisition proposals from third parties. Prior to a vote of the shareholders of Caesars, the Board of Directors will have the right to terminate the agreement and enter into an alternative transaction providing for a superior proposal, subject to the terms and conditions of the definitive agreement, the company said.
“There can be no assurance that this process will or will not result in a superior proposal,” the company said. “Caesars does not intend to disclose updates on this process unless and until it determines that such disclosure is appropriate or required.
The proposed transaction is not subject to a financing condition. It will be financed through a combination of equity contributed by Fertitta Entertainment, assumed Caesars’s debt, and new debt financing arranged by 10 banks, the company said.
PJT Partners is serving as exclusive financial advisor, Latham & Watkins LLP is serving as legal counsel, and Skadden, Arps, Slate, Meagher & Flom LLP is serving as antitrust counsel to Caesars Entertainment. Freshfields is serving as counsel to the Carano family. Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC are serving as financial advisors and White & Case LLP is serving as legal counsel to Fertitta Entertainment.
In a note to investors this morning, analyst David Katz with Jefferies Equities Research said the deal to go private “brings broad implications. The deal announcement is unsurprising, given extensive press coverage. We believe it raises key questions for the group, including the potential to catalyze incremental M&A at the property or corporate level, which could support near-term valuations. Separately, the outcome of discussions with VICI on regional leases remains an important read-through for Opco structures more broadly.”
Katz said questions include whether the management team will remain intact if the deal will require a divestiture of certain properties. “Notable overlap includes Las Vegas, Atlantic City, Laughlin, Lake Tahoe, Lake Charles, and Biloxi.”
Katz also wondered if the change in ownership might ignite a renegotiation of the regional lease with VICI; what synergies can be expected, such as a combined loyalty program, blending of entertainment/restaurant offering, or overhead cost saving; and if the deal triggers further M&A for the sector on a property or corporate level.
“News that Caesars and Fertitta were in discussions regarding a potential acquisition has been public since February, following bids from Carl Icahn that began at $28.50/share in January and increased to $33/share when Caesars and Fertitta entered an exclusive negotiating window,” Katz said. “Notably, The Wall Street Journal reported a potential transaction price with Fertitta as high as $34/share in March. That said, with Caesars’ management team expected to remain intact and the regional master lease with VICI still in place – which we view as a key overhang on VICI shares – any incremental change in strategy or operations may be limited until the company is private. In our view, the resolution of this long-rumored transaction could nonetheless act as a catalyst for additional deal activity across the group, with regional assets at Churchill Downs, Monarch, Boyd Gaming, Penn Entertainment and MGM Resorts International emerging as potential medium-term candidates.”
That has been echoed by other analysts as well.
