Carl Icahn may have doubled the audience for Caesars Entertainment’s scheduled fourth quarter earnings call this Thursday.
The company’s last two quarterly conference calls have been memorable for all the wrong reasons. But the news that the billionaire corporate raider has amassed a 10 percent stake in the Las Vegas-based casino giant – and wants the company’s board to seriously consider offers to sell the business – is likely to overshadow any talk of profits or losses.
How much the company will say on the call about Icahn, who has a long history with the casino industry, is speculative and might be just part of the story. Caesars is still searching for a new CEO following November’s announcement that Mark Frissora would step away from the position this month. When the search stalled, Frissora agreed to stay on the job through April.
“We think it’s possible Mr. Icahn’s reported involvement could ultimately be more about influencing the new CEO selection and board composition,” SunTrust gaming analyst Barry Jonas told investors in a research note on Friday.
The analyst said investors might be “skeptical of an imminent sale.” The stock jumped more than 6 percent in after hours trading on Thursday, but on Friday, the price fell 2.66 percent to close at $9.15 on Nasdaq, although more than double the average daily number of shares were traded.
“We have yet to see any SEC or regulatory disclosures around Mr. Icahn’s ownership,” Jonas wrote.
Icahn’s involvement in Caesars, first reported back in January, is part of the overall speculation swirling around the company, which is one of the largest casino owners on the Las Vegas Strip and operates more than 40 casinos in 13 states.
Activist investors have been at war with Caesars since the company exited a 30-month bankruptcy reorganization in October 2017. The company’s stock price took a huge hit in the summer and fall, dropping below $6 a share. Caesars has been trading above $9 a share in recent weeks.
Frissora, during August’s quarterly conference call, acknowledged his disappointment in some of the company’s investors, whom he termed “people in the stock that aren’t in it for the long haul.”
Jonas noted that some activist investors “recently exited their position” in Caesars, “which could indicate an activist-driven sale may not be imminent.”
Last fall, Caesars rejected a reverse merger/buyout offer from billionaire Tilman Fertitta, who controls the privately-held Landry’s hospitality corporation and the five Golden Nugget hotel-casinos. Fertitta, who is based in Houston, reportedly proposed that he run the combined Caesars-Golden Nugget conglomerate.
Meanwhile, the Wall Street Journal reported last week that Reno-based Eldorado Resorts also made a preliminary approach toward Caesars, although nothing concrete was discussed.
Eldorado has grown through several acquisitions over the last two years and is now the industry’s third largest regional casino company, with 27 casinos and properties in 13 states. The company acquired Isle of Capri Casinos in 2017 and the operations of Icahn’s Tropicana Entertainment last year, in partnership with real estate investment trust Gaming and Leisure Properties, in a $1.8 billion deal.
Credit Suisse gaming analyst Cameron McKnight said Thursday the stalled talks with Fertitta and Eldorado were “not a big surprise.” He said the investment community “assumed” there has been a formal sale process. Financial Times reported Friday the Caesars board “is open” to a sale or merger for the right opportunity.
“(We) see merits in both combinations and still believe Caesars assets (are) underappreciated,” McKnight said in a brief note to investors.
The Caesars bankruptcy reorganization created real estate investment trust VICI Properties, which owns the land and buildings associated with nearly two dozen Caesars casino-resorts. The company also has nine resorts on or near the Las Vegas Strip, meaning that any potential merger could be fraught with federal anti-trust issues.
Jonas said there are a “limited number of potential strategic or non-strategic acquirers” for Caesars. One potential solution could involve VICI acquiring the remaining casinos and real estate of Caesars the REIT doesn’t already own.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
