In the wake of Caesars CEO Mark Frissora’s announcement to step down from his position in 2019, rumors persist of a possible merger between Caesars and the MGM International casino brand.
Just half a month ago, talks of a Caesars Entertainment and Golden Nugget merger were making waves, but Caesars management shut down these rumors. However, the possibility of a new deal between MGM International has now reportedly escalated, which could see the two casino giants lumped together.
In recent days, the press has focused on how MGM brass recently signed the financial giant Morgan Stanley and the Weil, Gotshal and Manges law firm to overview the prospects of a MGM-Caesars merger though neither party has made an official announcement.
To put things into focus, Canyon Capital Advisors, a fund management company based out of Los Angeles, California, owns a quarter of Caesars’ shares. Interestingly, Canyon holds stake in MGM International as well.
Reports indicate that Canyon has made efforts to negotiate a lucrative deal with MGM, which some experts feel might be the driving factor behind Frissora’s decision to leave Caesars next spring.
The value of investment
Canyon’s current lodging and gaming investments manager, and former investment banker with Morgan Stanley, Chaney Sheffield, whom inside sources tie to the recent merger rumors. These insiders claim that Sheffield has hinted that a powerful merger would reduce overhead and expenses with marketing.
Ever since its bankruptcy filing three years ago, although it is performing better with Frissora at the helm, Caesars’ investors have been underwhelmed with the company’s performance. Caesars’ current aggressive expansion plan is partially to blame, and stockholders fear that the current CEO has stretched the company budget too thin.
Forbes recently capped Caesars’ worth at under $5 billion, with the value of MGM estimated at nearly fivefold that amount when including debt and equity.
Deal or no deal
Ever since Landry’s and the Golden Nugget Casino owner Tilman Fertitta approached Caesars’ top officials with a reverse merger deal, MGM now appears to be picking up where the latter left off.
Fertitta proposed that Caesars purchase his casino enterprise with a combination of cash and public shares that would value his firm at $13 a share.
The deal ultimately failed, and with current Caesars CEO Mark Frissora’s removal, a shift seems to be taking place among investors in Las Vegas.
Hedge funds are pushing for a shakeup, and as Caesars continues to see a rollercoaster in its share prices over the last week, only time will tell if the Caesars-MGM rumors can be substantiated.
Not long ago, Caesars purchased two Indiana-based casino for nearly $2 billion, a deal on which shareholders did not unanimously agree, analysts have stated.
Playing casino monopoly
Caesars now operates 49 casinos in 13 states and five countries, it is the largest gaming company in terms of property acquisition and ownership in the U.S., and the company intends to continue.
With MGM International’s current value set at nearly $30 billion, experts estimate that a unification of this scale would create a business with a more than $50 billion net worth.
A merger between the two casino operators would produce an entity that would control almost half of the available hotel rooms in both Las Vegas and Atlantic City, which could prompt the US Federal Trade Commission (FTC) to halt the deal out of fear of creating a monopoly.
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