Caesars Entertainment shareholders approval of Fertitta Entertainment’s acquisition offer for the company will see it taken private, a decision its chief executive says will benefit them in the long run.
“I’ll tell you that in the current environment, my favorite days are when my stock is down one or two cents,” said Caesars CEO Tom Reeg. “And the rest of the sector is getting ravaged the way it has been, because I don’t have to live through that.”
Reeg explained that as a private company, you get a longer-term perspective.
“We’re forced as public companies to think in 90-day (periods) and that’s not healthy … because that’s not how you run a business,” Reeg told CNBC reporter Contessa Brewer during a panel discussion Tuesday at Global Gaming Expo (G2E) at The Venetian Expo in Las Vegas.
Reeg was joined on the panel by Bill Hornbuckle, CEO of MGM Resorts International, and Craig Billings, CEO of Wynn Resorts.
“But what’s exciting for me is we’re combining a restaurant and hospitality business that has over 400 outlets across the country into a single ecosystem that becomes greater than the sum of its parts,” Reeg said.
Reeg said that it’s appealing to get out of the cycle where Caesars must explain every 90 days why the company’s profits didn’t hold for a month or two or three.
Brewer shared that the first earnings call she listened to after being assigned to cover the gaming industry was with Jim Murren, former CEO of MGM, who went after the analysts on the call.
“He was like, you guys pressure me every earnings call to show quarter-over-quarter improvement,” Brewer said. “I’m trying to build … a global company for the future and I can’t do that if every quarter, you’re expecting to see improvement.”
Brewer followed up by asking Reeg about the Federal Trade Commission’s (FTC) second request for information, as regulators are looking for overlap between the two companies and the possibility of properties that could be sold off to satisfy anti-trust considerations.
Caesars confirmed the request for additional documents on September 17 in connection with the FTC’s review of the merger.
Fertitta and Caesars have 30 days to comply with the request under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976. The HSR requires companies to notify the FTC and the Department of Justice before completing certain large mergers and acquisitions.
“I would say the second request from the FTC is a normal course for this stage of a transaction in the markets in question, and is not particularly material to me and the whole enterprise,” Reeg said.
“So you shouldn’t be surprised if a property of two ultimately gets divested, but I wouldn’t expect them to be (big) movers from a news perspective,” he added.
In terms of Caesars considering acquiring Fertitta, Reeg simply stated no.
“As was detailed in our proxy, that started with one of our board members effectively kicking off the process and making a bid themselves,” he said. “So after that came managing that process over a period of almost a year, so now there was no point.”
The Ichan Group initially bid $28.50 per share for Caesars, eventually increasing their offer on the last day of a 45-day “go-shop” period to $34 per share in cash, which topped Fertitta’s $31-per-share proposal.
Caesars ultimately rejected Ichan’s higher bid, due to heavy debt leverage, executive risks, and unresolved financing structures backed by Jefferies Financial Group.
Brewer then turned her attention to Hornbuckle, asking him if MGM was thinking about acquiring People Inc. Owned by Barry Diller, People decided to drop its $18 billion bid to purchase the outstanding shares in the gaming company.
The Wall Street Journal recently reported that MGM was preparing an offer to acquire People.
“We are going to do what we’ve always wanted to do and that is in the best interest of the shareholders, and trying to unlock the value of a company that we think is grossly undervalued,” Hornbuckle said.
Hornbuckle explained that you can look at the some of its parts and it’s a very complicated business, whether it’s BetMGM, Asia, Japan, and now the Las Vegas story. “The idea is to unlock some of that and we will continue to pursue that mission and see where it goes.”
Brewer said she looked at MGM’s share price before the discussion and it was $31.81; Diller’s price was $48.30. “What’s the right price?” Brewer asked.
“Do you really think I’m going to say that here,” Hornbuckle said. “Look, it’s truly what I just said. Trying to figure out the best way to unlock value and, look, Barry Diller … has been a great colleague and great in the boardroom.”
Hornbuckle said they’ll continue to talk and “we’ll see where this ends up.”
Reeg stressed that his takeaway from all of this is Barry Diller, Carl Ichan, and Tilman Feritta are three of the most successful builders of business in the world over decades. “And look where they’re looking for value … at Las Vegas,” Reeg said.
