Caesars Entertainment Sweeping Changes Send Stock Price Soaring

Barbara Nathan March 8, 2019 46 Reads

The name Caesars and the term “small scale’ are as incompatible as oil and water. So it almost goes without saying that any time Caesars Casino is in the news, it is big news.

Caesars Entertainment is a company that has never been content to rest on its laurels.

Sometimes another casino operator temporarily steals the limelight or otherwise becomes the focus of huge media attention. However, don’t assume that Caesars is simply quietly going about its business.

Just because you might not be privy to the rumblings going on beneath the surface, that doesn’t mean they aren’t happening. At any time, and sometimes when you least expect it, an explosion could erupt seemingly about of the blue, putting Caesars back in the spotlight.

One of the biggest casino companies in the world

No wonder Caesars is both one of the biggest casino entertainment companies in the world and also the most geographically diversified casino company in the world.

From its humble beginnings in 1937 as Harrah’s Reno, Caesars attained its mega status in the casino world today through continued development of new facilities, expansions, and acquisitions.

Its presence now spans four continents. Caesars Entertainment is also the largest casino operator in Atlantic City.

As the owner of three of the nine currently operating casinos in Atlantic City–Bally’s, Caesars, and Harrah’sCaesars controls 33% of the Atlantic City casino gambling market.

Goodbye Total Rewards, hello Caesars Rewards

As of February 1, 2019, the Caesars loyalty rewards program that was formerly called Total Rewards is now Caesars Rewards. The four tiers remain the same and according to Caesars, the respective benefits will also remain intact. However, inasmuch as the new name has just gone into effect,  changes in benefits down the road are still possible.

For now, the reason for the name change is presumably to capitalize on the enhanced value of the Caesars brand. It also reflects the increased emphasis on the part of Las Vegas casino companies, and now Atlantic City casinos as well, on marketing themselves as entertainment companies.

The outgoing CEO of Caesars Entertainment, Mark Frissora has even mentioned the possibility that all hotel-casinos under the Caesars umbrella will insert the words “Caesars Entertainment presents” in front of their property name.

Carl Icahn will have a big say in Caesars Entertainment’s Future

Since the start of the 21st century, one name that has come up frequently in Atlantic City casino gambling news is Carl Icahn. This billionaire investor has had a long, complicated relationship with other Atlantic City casinos.

He also seems to have a special knack for being able to turn over the various properties he gets his hands for huge personal gain.

Therefore, it is no great surprise that now he has his foot in the door in Caesars-owned casinos, too.

Notable past Atlantic City acquisitions

Sands Casino Hotel

Back in 2000, Icahn acquired the then-bankrupt Sands Casino Hotel for $75 million. Then in 2006, he sold it to Pinnacle Entertainment for $270 million.

The following year the building was imploded, leaving in its wake an empty lot, which still remains.

Tropicana

Icahn’s purchase of the Tropicana had a much more successful outcome. In 2009, he rescued the Atlantic City resort from bankruptcy.

Subsequently, with Tony Rodio at the helm,  Icahn was instrumental in turning it into the second highest grossing revenue producing property in the Atlantic City market.

In 2018 Icahn sold Tropicana Entertainment’s seven casinos for $18 billion to Eldorado Resorts and Gaming and Leisure Properties.

Trump Taj Mahl

In 2016 Icahn also acquired both Trump Taj Mahal Casino Resort and the already closed Trump Plaza as part of a deal with Trump Entertainment.

However, Icahn and Local 54, which represented the Taj Mahal workers, were at an impasse over the workers’ loss of benefits.

During the summer of 2016, a crippling strike–the longest in Atlantic City casino history–led to the permanent closure of the Trump Taj Mahal on October 10. But in 2017 Icahn sold the shuttered property to Hard Rock International for $50 million.

The latter spent $500 million more to completely renovate and rebrand it. On June 27, 2018,  Hard Rock Hotel and Casino Atlantic City opened for business.

Trump Plaza

As for Trump Plaza, despite closing permanently on September 16, 2014, Icahn has so far been unable to find another buyer.

Despite its prime location right off the Atlantic City Expressway, next to Caesars and very close to the Atlantic City outlets, the building still stands vacant. Serving no purpose whatsoever, it is regarded as a big eyesore.

In 2017 Icahn wanted to demolish the building, using close to $5.6 million from casino alternative investments to finance the undertaking.

However, State Senate President Steve Sweeney and the CRDA blocked the project.

Icahn’s latest move: gaining significant control over the Board of Directors at Caesars

According to a filing with the Security Exchange Commission, over the last few months, Icahn spent $566 million to acquire 9.8 percent of Caesars Entertainment’s outstanding shares.

It was a carefully calculated move that would give Icahn significant control over the Caesars Board of Directors. It will also give him a huge say in the direction in which the company would be heading in future dealings.

On Friday, March 1, 2019 Icahn and Caesars Entertainment reached the following  agreement.

The company would replace three of the 12 existing board members as well as allow for a 4th replacement in the event a new CEO “who is acceptable to the new directors” is not named in 45 days.

The new CEO would replace Mark Frissora, who is on his way out.

In other words, according to CDC Gaming Reports, Inc., Icahn would have an almost total say regarding who will be the next CEO at Caesars.

Who will replace Mark Frissora as CEO of Caesars?

According to Reuters, one of the names up for consideration as the new CEO of Caesars is Tony Rodio, former CEO of the Tropicana Atlantic City when Icahn owned the property.

Another is Golden Nugget owner Tillman Fertitta. In the fall of 2018, Fertitta offered to pay $13 per share to take control of the company and combine it with Golden Nugget.

While the Caesars Board of Directors rejected the offer, Fertitta did acquire a less than 1% share of Caesars in February, 2019. So he could conceivably buy a bigger share and re-emerge as a contender for CEO.

According to Icahn, a sale or merger would be in Caesars Entertainment’s best interest

In a press release that Icahn issued March 1, he gave the following statement:

“I believe that the best path forward for Caesars requires a strategic process to sell or merge the company to further develop its already strong regional presence.”

However, he added that doing so would “allow Caesars to continue to take advantage of the Caesars Rewards program bringing more and more players into Caesars’ Vegas market” in order to “make Caesars the most powerful competitor in Vegas.”

No mention at all was made of Atlantic City.

Icahn further stated that “Caesars would be a great opportunity for certain investors who have already expressed interest.”

Caesars’ reaction

Caesars Chairman of the Board James Hunt also reacted enthusiastically to the changes in saying the following:

“Our new colleagues bring diverse and relevant experience, and we look forward to them joining our board in our ongoing efforts to further enhance value for all shareholders. Since the completion of Caesars’ restructuring, we have been undergoing a strategic process to create value, and we will continue that process working with our new directors. On behalf of the entire Board and Caesars’ nearly 68,000 employees, I want to thank our departing director colleagues for their distinguished and tireless service to the Company.”

Caesars stock price soars

Following the announcement of Icahn’s deal with Caesars, the stock price has gone up more than 4 percent.

Caesars partnership with the NFL

Apart from the Icahn deal, another major development that will undoubtedly have a huge impact on Caesars Entertainment’s future is its partnership with the NFL.

On January 3, 2019 the National Football League announced that they have chosen Caesars Entertainment Corporation to be the first-ever Official Casino Sponsor of the NFL.

The multi-year sponsorship went into effect during the 2019 NFL playoffs. Caesars can use its casino properties, celebrity chefs, and name entertainers to provide enhanced experiences at important NFL events. So this looks like a win-win-win situation whereby Caesars, the NFL, and fans will all benefit.

Caesars will also have the exclusive right to use NFL trademarks in the US and UK for the purpose of promoting Caesars casino properties. However, the use of the NFL logo to promote sports betting is not part of the deal.

Conclusion

It would be reasonable to assume that the deal with the NFL played a role in Icahn’s sudden interest in Caesars. In addition, not only Icahn’s history in Atlantic City but also his own recent statements, provide a strong clue about his intentions down the road.

Icahn foresees either selling the property or having Caesars merge with another company.

According to Barry Jonas, a gaming analyst for SunTrust, an outright sale of Caesars would be difficult. He believes that a reverse merger is more likely.

As other important new developments unfold at Caesars, we will do our best on NJ Gambling Websites to keep you as well informed as possible.

Meanwhile, if any of the Caesars-owned casinos in Atlantic City or Caesars-owned NJ gambling websites are places where you like to play, we encourage you to continue doing so.

The fact that Total Rewards is now Caesars Rewards should not detract in any way from your still being able to receive the many outstanding benefits for which the program is known.

Caesars will also continue to offer you great online promotions, as always.

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