As Investor Carl Icahn Buys Into Caesars, What’s Next For The Company?

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Caesars Entertainment has had a rough time moving forward since emerging from bankruptcy in 2017. However, shares jumped more than 5 percent after hours on Tuesday night ahead of their 2018 fourth quarter and annual earnings.

The excitement for the national casino operator wasn’t because of their performance. The increase in share price was because of the confirmation of a rumor about Carl Icahn buying shares in Caesars Entertainment.

Carl Icahn invests in Caesars Entertainment

According to CNBC, the activist investor now owns almost a 10 percent stake in Caesars Entertainment. The reason for the interest in Caesars Entertainment stock is about what he said in a regulatory filing with the Securities and Exchange Commission (SEC). Icahn is calling for Caesars Entertainment to sell itself.

In the filing, Icahn said, “the board should conduct a strategic process to comprehensively assess the best path forward for Caesars and believe that shareholder value might be best served, and enhanced, by selling the company.”

He continued “We look forward to holding discussions with the Board, and importantly, we expect the Issuer to refrain from appointing a new CEO (or further extending Mark Frissora’s tenure) until we have had an opportunity to meaningfully engage with the Board.”

Icahn has also been entrusted with helping select the company’s new CEO, successor to Frissora. Aiding in the selection process might also score Icahn some seats on the Board of Directors.

Rumors about the future of Caesars Entertainment

Last year there was a rumor in the New York Post that MGM Resorts International was exploring a merger with Caesars Entertainment. That rumor was quashed by the same newspaper when it was revealed that MGM Resorts has its own activist investors with different plans.

Less than a week ago the Wall Street Journal reported that Eldorado Resorts and the Golden Nugget have both approached Caesars Entertainment about purchasing the company. Last year Caesars Entertainment rejected an offer to merge with the Golden Nugget.

Being told no hasn’t stopped Golden Nugget owner Tilman Fertitta from recently purchasing more 4.5 million shares of Caesars Entertainment. He now owns about 1 percent of Caesars Entertainment.

Golden Caesars Nugget Entertainment + Landry’s?

Fertitta owns the Golden Nugget casino chain, Landry’s restaurants, and the Houston Rockets basketball team. He also has his own show on CNBC called “Billion Dollar Buyer” where he looks to find successful small businesses to see if they’re compatible with his Landry’s properties.

Icahn is an investor looking to increase the value of the company he owns a stake in. Caesars Entertainment is a large corporation that operates 40 casinos in 13 states. There aren’t many other casino operators that could purchase Caesars Entertainment without creating some form of a monopoly.

  • Boyd Gaming operates 29 casinos in 10 states.
  • Eldorado Resorts operates 27 casinos in 13 states.
  • Penn National will operate 42 casinos in 19 states by the end of the year.

In addition to casinos and sports partnerships, Caesars Entertainment has started operating non-gaming hotels outside of the U.S. They recently announced plans to start a new non-gaming hotel brand in the U.S. called Caesars Republic.

There’s a lot to unpack with a company possibly buying Caesars Entertainment. Fertitta with his small casino operation and chains of restaurants could be the right match. There are only a handful of Golden Nugget casinos around the U.S.

It could be relatively easy to bring the Golden Nugget brand into the Caesars fold. If the casinos have to be sold, it would be easier to sell five casinos to one of the larger casino operators.

Fertitta’s restaurant brands could bring new life to some properties. They could also complement the national awareness of Caesars Entertainment’s restaurants operated celebrity chefs.

Stay tuned

This saga will continue for Caesars Entertainment and it appears they are taking Ichan’s demands very seriously.

The investor is not new to the gaming industry. He’s previously owned casinos in New Jersey, Nevada, and around the U.S. Icahn’s most recent casino transaction was selling Tropicana to Eldorado Resorts for $1.85 billion.

Coincidentally, the purchase of Tropicana might keep Eldorado out of the running to purchase Caesars Entertainment. Stay tuned, because the future of Caesars Entertainment could change at any minute.

Marc Meltzer

About

Marc grew up on the mean streets of the South Bronx. He's the rare combination of Yankees and Jets fan which explains his often contrarian point of view. Marc is a freelance writer and social media consultant. Writing about steak, booze, gambling and Las Vegas is a tough job but somebody has to do it.

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