On Tuesday, shareholders of Caesars Entertainment approved the company's substantial $17.6 billion merger with Fertitta Entertainment, marking an important step forward in the complex process of taking the company private. Approximately 65% of eligible shareholders cast their votes in favor of the merger, as detailed in Caesars' 8K filing with the U.S. Securities and Exchange Commission. The deal was first announced in May and followed months of bidding activity between Fertitta and Carl Icahn, who previously amassed a controlling interest in Caesars and guided its transition to Eldorado Resorts in 2020.
Under the terms of the agreement with Fertitta, the Carano family, associated with Eldorado, will maintain its equity, and the current management team will remain intact. The vote took place at a special meeting held Tuesday at the Eldorado Resort and Casino in Reno, Nevada.
In a separate SEC filing on Monday, Caesars disclosed that it received a demand letter from a shareholder on September 15, which requested access to certain company records and accused Caesars of failing to adequately disclose details surrounding its legal counsel for the merger. Caesars labeled these claims as "without merit" and "immaterial." To mitigate potential delays and avoid unnecessary expenses, the company provided additional information regarding Latham & Watkins LLP to the SEC. Latham is serving as Caesars' legal counsel for the merger, while also representing Tilman Fertitta on unrelated matters. Notably, the legal fees related to Fertitta’s representation are stated to be significantly lower than Caesars' costs for the merger.
As the shareholder approval progresses, several hurdles remain before finalizing the merger. A major requirement is obtaining antitrust approval from the Federal Trade Commission (FTC). The initial antitrust application was submitted to the FTC in July, but on September 14, the commission requested further information from both parties, extending the review process by 30 days once compliance with the request is confirmed. Caesars did not elaborate on the specific information sought by the FTC.
Due to overlapping markets, it is probable that the merger will necessitate some divestitures. Caesars and Fertitta's Golden Nugget competitive presence spans six markets across the U.S., including three locations in Nevada: Las Vegas, Lake Tahoe, and Laughlin. In a previous ruling tied to the Caesars-Eldorado merger, the FTC mandated Eldorado to divest some of its casinos, including those in Lake Tahoe, Bossier City, and Kansas City. In addition, both companies divested several properties around the same time.
Stock trading also reflects uncertainty surrounding the merger. Fertitta might still be assessing financing options for the $6.6 billion package negotiated in the merger. According to an SEC proxy filing, the senior secured credit facility includes two components: a $2 billion revolving credit facility and $4.6 billion in term and bridge loans.
In July, the company indicated to Nevada regulators that it was awaiting a more favorable money market for fundraising, but this situation has yet to develop. The U.S. Federal Reserve raised interest rates for the first time in three years recently, with further increases anticipated before year-end.
Caesars shares closed at $29.61 on Wednesday, a slight decrease of 0.03%. Fertitta's proposed bid of $31 per share in May represented a 49% premium compared to Caesars' closing price in February when Fertitta first made his offer.
