by Associated Press | February 21, 2019
LAS VEGAS (AP) - Caesars Entertainment said Wednesday that it has talked with billionaire investor Carl Icahn, who began pushing for fundamental changes this week after revealing a 10 percent stake in the casino operator.
Caesars said it is evaluating Icahn's ideas and will keep listening to the activist investor. The company's comments came a day after Icahn said in a Securities and Exchange Commission filing that he wants the company to pursue a sale while making leadership changes and adding some of his own choices to the board of directors.
"Caesars Entertainment regularly engages with our stockholders and considers their ideas and input regarding stockholder value," the company said in a statement. "The company intends to carefully evaluate Mr. Icahn's suggestions, including his request for board representation."
In Tuesday's filing, Icahn said Caesars' stock is undervalued and the best way to boost it would be to sell the company. He also revealed that he wants a say in whom the company appoints to replace CEO Mark Frissora, who guided Caesars through its more than two-year-long bankruptcy reorganization.
Frissora was scheduled to leave his position this month, but that departure was pushed back to the end of April. Icahn said he doesn't want Frissora's tenure extended again and expects the company to put off appointing a new leader until he and the board have engaged "meaningfully."
The casino behemoth emerged from an $18 billion bankruptcy in October 2017. It operates more than 35 casinos in the U.S. Its casino-resorts operate primarily under the Caesars, Harrah's and Horseshoe brand names.
Caesars emerged from an $18 billion bankruptcy in late 2017. Icahn's move comes after the casino operator was approached by at least two companies.
Caesars in November confirmed that it had received a proposal from casino operator Golden Nugget LLC, owned by Houston billionaire Tilman Fertitta. The proposal called for Caesars to "acquire substantially all of Golden Nugget's restaurant, hospitality, entertainment and gaming businesses in exchange for a significant minority of Caesars' common shares."
Caesars at the time said its board rejected the proposal, but "continues to be open to reasonable alternatives to enhance long-term shareholder value."
The Wall Street Journal last week reported an official with Eldorado Resorts Inc. also "made a preliminary approach" over the past several months.
Analysts at J.P.Morgan in a note to investors said they do not see an obvious suitor that could or would take Caesars' entire portfolio of assets, including the nine properties on the Las Vegas Strip. They pointed to MGM Resorts International as the "most obvious potential acquirer," but said that company has been clear about giving priority to its current projects.
Alex Bumazhny, gambling analyst with Fitch Ratings, told the Associated Press Icahn "has a good track record" in the gambling sector.
"When news breaks of (a merger and acquisition) transaction, the target's stock will gravitate towards the premium price being offered by the acquirer," he said. "Seeing that Caesars has potential suitors, it's possible Icahn is simply banking he could push Caesars to accept an offer and bank the (merger and acquisition) premium."
Shares of the Las Vegas-based company jumped more than 5 percent Tuesday on news of Icahn's involvement but were still down 27 percent from a year ago. Icahn last year sold his Tropicana Entertainment casino company for $1.85 billion.
David Katz, equity analyst at Jefferies, said there are things Caesars could do to capture a better value for its stock that do not involve selling itself, including sharing expectations more effectively. He said Caesars' "value story" has not been told effectively since the company emerged from bankruptcy.
"That story is about the brand and the loyalty program that they have," he said. "We know that that brand has value because when you visit their properties, whether or not they are the nicest, they are consistently the busiest, and that's because of the loyalty program they have."
Caesars reports fourth-quarter earnings results Thursday.