On Tuesday, shareholders of Caesars Entertainment approved a significant move that could reshape the company, supporting its $17.6 billion merger with Fertitta Entertainment. This pivotal vote marked a crucial step forward in the complex transaction, which was first revealed in May. According to a filing with the US Securities and Exchange Commission (SEC), approximately 65% of eligible shareholders backed the deal, which emerged after a bidding war between Fertitta and activist investor Carl Icahn, who previously held a controlling stake in Caesars and facilitated its sale to Eldorado Resorts in 2020.
As part of the arrangements with Fertitta, the Carano family of Eldorado will maintain their equity interest, and the existing management team will remain unchanged. The special meeting for this vote took place at the Eldorado Resort and Casino in Reno, Nevada.
In a separate SEC filing, Caesars revealed it received a demand letter from a stockholder on September 15. The letter requested to inspect company records, claiming a lack of proper disclosure regarding its legal representation in the merger process. Caesars responded by declaring the claims as "without merit" and "immaterial," but to avoid potential delays, they provided additional information about their legal counsel, Latham & Watkins LLP, to the SEC. Latham is representing Caesars in the merger; however, they also represent Tilman Fertitta in unrelated matters. The filing indicated that Fertitta's legal fees to Latham are substantially lower than what Caesars will incur in connection with the merger.
Despite the shareholder approval, the deal still faces important challenges. A crucial step is obtaining antitrust approval from the Federal Trade Commission (FTC). The Hart-Scott-Rodino antitrust application for the merger was filed in July, but on September 14, the FTC issued a second request for additional information from both parties, extending the review process by 30 days once they comply. The specifics of what was requested remain undisclosed, but given the overlap in markets between Caesars and Fertitta's Golden Nugget brand, divestitures may be necessary for the deal to proceed. Both companies compete in six markets across the US, including three in Nevada: Las Vegas, Lake Tahoe, and Laughlin. When the FTC previously approved the Caesars-Eldorado merger, it mandated Eldorado to divest several casinos, which included locations in Lake Tahoe, Bossier City, and Kansas City.
Fertitta is also still reviewing financing options for the substantial portion involved in the merger. An SEC proxy filing indicated that the $6.6 billion financing arrangement comprises a $2 billion revolving credit facility, along with $4.6 billion in term and bridge loans. Earlier in July, Fertitta informed Nevada regulators that they were waiting for a more favorable interest rate environment to secure this financing, but current conditions remain challenging. Recently, the US Federal Reserve increased interest rates for the first time in three years, with anticipations of additional hikes by year-end.
On the stock market, Caesars shares settled at $29.61 on Wednesday, reflecting a slight decline of 0.03%. Fertitta's bid of $31 per share, made in May, represented a 49% premium compared to Caesars' closing price in February at the time the offer was presented.
