On Tuesday, shareholders of Caesars Entertainment gave their approval for the company's $17.6 billion merger and take-private transaction with Fertitta Entertainment, marking a significant hurdle cleared in this intricate deal. According to Caesars' 8K filing with the U.S. Securities and Exchange Commission, approximately 65% of eligible shareholders supported the agreement, which was first announced in May.
The merger follows a bidding contest, with Fertitta outbidding Carl Icahn, who had previously acquired a controlling stake in Caesars and facilitated its sale to Eldorado Resorts in 2020. Following the merger, the Carano family from Eldorado will retain its equity, and the current management team will remain intact. A special meeting to vote on the deal took place at the Eldorado Resort and Casino in Reno, Nevada.
In a related SEC filing issued on Monday, Caesars revealed it had received a demand letter from a stockholder on September 15, seeking to review certain corporate records and alleging inadequate disclosure regarding the company's legal representation in the merger. Caesars dismissed the claims as “without merit” and “immaterial,” but opted to provide additional information about Latham & Watkins LLP to the SEC. While Latham has represented Caesars in the merger, it also serves Fertitta founder Tilman Fertitta in unrelated matters. The legal fees incurred by Fertitta for his counsel are notably lower than those incurred by Caesars as part of the merger agreement.
Despite the shareholder approval, several hurdles remain for finalizing the deal, notably the necessity of obtaining antitrust clearance from the Federal Trade Commission (FTC). The initial Hart-Scott-Rodino antitrust filing was submitted in July, but on September 14, the FTC requested further information from both parties, extending the review process by 30 days once adequate responses are provided. The details of this additional information have not been made public.
Given the overlap between Caesars and Fertitta’s Golden Nugget brand in multiple markets, it is anticipated that some divestitures will be necessary to secure approval. The two entities compete in six U.S. markets, including Las Vegas, Lake Tahoe, and Laughlin in Nevada. In the earlier Caesars-Eldorado deal, the FTC mandated Eldorado to divest some of its casino holdings, including locations in Lake Tahoe and Bossier City.
On the financial front, Fertitta is still looking for options to fund the $6.6 billion financial package tied to the merger. As detailed in a proxy filing, this package consists of a senior secured credit facility including a $2 billion revolving credit and $4.6 billion in term and bridge loans. In July, Fertitta informed Nevada regulators that it was waiting for a more favorable interest rate environment to secure the necessary financing, a condition that has yet to occur. In September, the Federal Reserve raised interest rates for the first time in three years, with further increases expected before the year concludes.
As for market performance, Caesars shares traded at $29.61 on Wednesday, reflecting a marginal decline of 0.03%. The company accepted Fertitta's initial offer of $31 per share in May, a significant 49% increase over its closing price from February when Fertitta made the proposal.
