Tilman Fertitta, the owner of the Golden Nugget Casino, approached Caesars Entertainment Corp. last Wednesday about a potential reverse merger offer, according to those closest to the magnate.
Fertitta’s proposed deal would see the famed Golden Nugget Casino, located in Downtown Las Vegas, acquired by its larger competitor Caesars, and reports indicate that his offer includes a $13 a share, public stock and cash option.
The merger would help a financially rocky Fertitta, who took out a huge loan to buy the NBA’s Houston Rockets basketball team for $2.2 billion in 2017, and Caesars, which has been suffering from a slow gambling market since declaring bankruptcy the same year.
The new development has piqued the interest of third party members, and Fertitta, a wizard in the restaurant business, with financial giant Forbes once calling him the “World’s Richest Restaurateur”, is continuing with his aggressive business model in the gaming sector.
Role of investors
Insiders claim that Caesars’ investors welcomed the business proposal, but casino giant Caesars has yet to make a statement publicly.
Caesars Entertainment, the world’s fourth largest casino gaming company, suffered a nearly 20% drop in its shares since filing Chapter 11 bankruptcy in 2017. However, once news broke of Fertitta’s proposal, its shares rose a dramatic 12%.
Fertitta, who in recent years, opened a casino resort in Louisiana and upgraded casino properties in Atlantic City and Nevada, aims to overlap his debt into a greater enterprise with the new declaration.
Fertitta’s empire includes restaurants and casinos across the U.S., generating two-thirds of a billion in revenue according the Bloomberg index. With some thirty properties across the country, Fertitta’s company asset value, estimated at $4.3 billion, while Caesars falls just short of $7 billion.
The new plan
Those in the inside circle stated that Fertitta’s proposal includes taking the role of chairperson and CEO of the newly combined enterprise, while Caesars Entertainment would sell off land and businesses under Fertitta’s control. These include the dining company Landry’s as well as the Golden Nugget Casino property. The assets would fall under a real-estate investment trust, and Caesars could then use the resulting cash to repurchase its own shares.
To the dismay of some investors, Fertitta’s offer reportedly did not extend to Caesars’ largest shareholders, the private equity funds Apollo Global Management and TPG. A factor, which could prove to be a major hurdle in the coming negotiations.
After its lengthy court battle with bankruptcy, Caesars has been doing all it can to boost revenues in order to keep up with the pace of its counterparts, MGM Resorts International and Wynn Resorts.
Caesars’ new business model includes geographical expansion and aggressive acquisition; having recently closed a deal with Centaur Holdings LLC, a privately owned horseracing and gaming company based in Indiana. The recent purchase cost the company $1.7 billion, paid in cash, helping lock down a key sector of the gaming market in the U.S.
If Fertitta’s efforts work, this could mark the trend for other major casino companies to explore merger and acquisition opportunities, especially for companies coming out of bankruptcy protection.
Currently, Caesars Entertainment is in charge of nearly 50 establishments throughout North America, the United Kingdom, Egypt, as well as South Africa. There are also plans to open two non-gaming venues in Dubai in November, the launch of mirror properties in Mexico for 2019, as well as interest in an €8 billion euro mega-resort in Athens, Greece.
Time will tell what the outcome will be for the proposed Vegas-based merger amidst the tepid gaming market.
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