On Wednesday, shares of Caesars Entertainment (NASDAQ: CZR) dipped following reports that Carl Icahn might struggle to present a takeover proposal that would distract the casino operator from its existing offer from Tilman Fertitta.
Reports surfaced late Tuesday that Icahn is vying for a competitive bid for the gaming enterprise, potentially valuing shares between $35 and $40. Sources suggest that Jefferies is in discussions with investors regarding $5 billion in debt financing intended to support his offer. Currently, it seems the activist investor is preparing a $33 per share bid for Caesars, which is closer to the $31 per share proposition from Fertitta that the Caesars board is recommending to shareholders. Due to debt intricacies, Icahn may struggle to convince the Caesars board to reconsider the Fertitta offer.
“From what I gather, it’s going to be a challenging situation,” reports CNBC’s David Faber. “They are leaning towards the Tilman deal. It has solid financing. Additionally, the debt package is closely tied to the management team, meaning if there’s a management change, there could be a need to refinance significantly more debt, making it complex.”
Fertitta’s proposal, which includes the assumption of Caesars’ $11.9 billion liabilities, values the company at $17.6 billion and has already secured financing from approximately 10 banks for the debt component, suggesting that his offer is on a more stable footing compared to a competing bid from Icahn.
Icahn Faces Time Constraints
As highlighted by Casino.org on Tuesday, Icahn’s acquisition attempt may involve negotiating with Caesars bondholders to shift some of the gaming firm’s assets into an unrestricted subsidiary—an arrangement that would limit creditors’ ability to recover adequately in a change of control scenario.
This indicates that Icahn’s offer is fraught with complexities absent from the Fertitta proposal, which could hinder his ability to finalize the bid, especially as Caesars’ 45-day go-shop period ends on Saturday.
The CNBC report suggests that while Icahn is indeed making efforts to submit a proposal for Caesars, his activities have only lately gained momentum, which may signal that time is not on his side to push through a more intricate bid and secure the board’s backing.
Since Fertitta’s proposal was disclosed in late May, many analysts have expressed that it undervalues Caesars, yet believe that substantial competing offers are unlikely.
Caesars May Need to Consider Icahn
If Icahn can construct a credible takeover bid before the Saturday deadline, Caesars might have little choice but to consider it due to Icahn’s influence within the company.
Having re-established an equity stake in the Harrah’s operator in 2024, Icahn’s Icahn Enterprises now holds approximately 5% of Caesars’ total shares. Furthermore, last year, Jesse Lynn, the general counsel of Icahn Enterprises, and Ted Papapostolou, the CEO of the firm, were appointed to Caesars’ board.
So far, the casino firm has not disclosed individual board members’ opinions on the Fertitta bid, other than asserting that the board collectively supports it.