Tilman Fertitta, the billionaire from Houston, has made headlines this year with his attempt to take Caesars Entertainment private. However, as the 11 July deadline for a competing offer approaches, billionaire Carl Icahn is reportedly considering a last-minute bid.
Bloomberg reported that investment bank Jefferies Financial is exploring interest in a $5 billion debt financing package for Icahn's offer, which is set at $33 per share. This figure surpasses Fertitta's existing proposal of $31 per share and aims to take the company private as well. Fertitta's all-cash offer, totaling $17.6 billion, includes $5.7 billion in equity and nearly $12 billion in assumed debt.
Icahn's target is described as a complex liability management exercise (LME), a method typically employed by companies to restructure debt and steer clear of bankruptcy. Such strategies have grown more common amid rising interest rates. While trading volumes surged on Tuesday due to the news of Icahn's interest, Caesars' stock price stabilized around $30.
David Faber of CNBC expressed skepticism about Icahn's ability to sway the Caesars board at this late stage. "Will [Icahn] get to a finish line here that’s acceptable to the board of directors? From what I’m hearing, it’s a tough slog," he remarked, noting that the board favors the Fertitta deal due to its secured financing. He added that the debt package would complicate matters if the current management team were to leave, requiring significant refinancing.
Although Icahn's intentions appear serious, time constraints and his past dealings with Caesars complicate his position. Since 2019, Icahn has gradually acquired a controlling stake in Caesars, leading to its acquisition by Eldorado Resorts in 2020, before selling his interests. The current management team, including CEO Tom Reeg and the Carano family, originated from Eldorado.
The outcome of that deal left Caesars shareholders in a precarious situation, with stock values plummeting nearly 70% over five years. The stock dipped below $20 earlier this year before recovering to around $29 amid takeover discussions. It remains uncertain if investors are inclined to support another Icahn-led takeover.
Icahn, 90, has begun rebuilding his stake in Caesars early this year, leading to the appointment of two board members from Icahn Enterprises: CFO Ted Papapostolou and general counsel Jesse Lynn. At that time, discussions about spinning off Caesars' digital assets were seen as a significant incentive for Icahn's renewed interest, with the company open to negotiations.
“I welcome him to join us,” CEO Reeg said during last year’s East Coast Gaming Congress, acknowledging their positive rapport.
In a recent development, Caesars announced a reduction in board members from 11 to 10, a change that might hinder Icahn’s position rather than improve it. Courtney Mather, a board member and Craft chief investment officer since 2019, will resign effective 6 July. Mather previously worked as a managing director for Icahn Enterprises from 2014-2020. His resignation, noted in an SEC filing, is stated not to stem from any disagreement with Caesars.
As Icahn works to solidify his bid, Fertitta’s plan is moving ahead. This week, the initial executives from Fertitta Entertainment will face the Nevada Gaming Control Board to assess their suitability for licensing. The two executives, CFO Richard Liem and senior vice president Steven Scheinthal, are just the first in a lengthy regulatory process expected if Fertitta’s acquisition is approved. Fertitta's Golden Nugget Casinos operate in several markets that compete with Caesars, including Nevada's Laughlin and Lake Tahoe.
When Eldorado acquired Caesars, regulators imposed similar antitrust obligations, which are likely to resurface should Fertitta's deal proceed. The NGCB has confirmed it will defer any state-level decisions until after a federal ruling.
On Wednesday, Caesars' shares closed at $29.82, reflecting a slight decrease. Notably, the stock was trading at about $28 prior to the announcement of the agreement with Fertitta on 28 May.
