Caesars Entertainment's shareholders have given the green light to the company’s $17.6 billion merger with Fertitta Entertainment, a significant step toward completing this high-stakes transaction. On Tuesday, approximately 65% of eligible investors voted in favor of the merger, which is a pivotal milestone in a complex deal initially announced in May. The bidding for Caesars involved both Fertitta and Carl Icahn, the latter having previously acquired a controlling stake in the company and orchestrated its sale to Eldorado Resorts in 2020.
Under this merger arrangement, the Carano family, which leads Eldorado, will maintain their equity interests, and the current management team at Caesars will remain in place. Shareholders cast their votes at a special meeting held at the Eldorado Resort and Casino in Reno, Nevada.
While the shareholder approval is crucial, Caesars noted in a recent SEC filing that it received a demand letter from a shareholder on September 15, asking to examine specific company records. The letter alleged that disclosure regarding legal representation connected to the merger was inadequate. Caesars dismissed the claims as "without merit" and "immaterial," but in an effort to avoid delays and potential costs, the company provided further details about its legal counsel, Latham & Watkins LLP. This firm is representing Caesars in the merger, but also serves Fertitta founder Tilman Fertitta on unrelated legal matters. According to Caesars, Fertitta's legal fees with Latham are significantly lower than those incurred by Caesars related to the merger.
The path to closing the merger still faces hurdles, the most notable being the required antitrust approval from the Federal Trade Commission (FTC). An initial Hart-Scott-Rodino antitrust filing was submitted to the FTC in July, but on September 14, the commission requested additional information, extending the review process by 30 days after both parties comply with this request. The specifics of the requested information have not been disclosed. Given the competitive overlap in markets between Caesars and Fertitta’s Golden Nugget brand, divestitures could be necessary for the deal to proceed. Both companies operate in six markets across the U.S., including three in Nevada: Las Vegas, Lake Tahoe, and Laughlin. When the FTC previously approved the Caesars-Eldorado transaction, it mandated Eldorado to sell off properties in Lake Tahoe, Bossier City, and Kansas City, among others.
In terms of financing, Fertitta may still be assessing options for a $6.6 billion financing package that is part of the merger agreement. An SEC proxy filing indicates that this senior secured credit facility comprises a $2 billion revolving credit line and $4.6 billion in term and bridge loans. Fertitta had informed Nevada regulators in July that it was aiming to raise funds in a more favorable money market environment, which has yet to materialize. This month, the U.S. Federal Reserve raised interest rates for the first time in three years, with expectations of further increases before the year concludes.
As for stock performance, Caesars closed on Wednesday at $29.61 per share, seeing a slight decline of 0.03%. This follows Fertitta’s bid of $31 per share, which marked a 49% premium over Caesars' closing price in February when the bid was made.
