Caesars Restructures Company with “Growth Oriented” Spin-off
Caesars Entertainment Corp. said last week that it will spin off its interactive gaming business, Planet Hollywood and a planned casino in Baltimore into a separate company owned in part by the casino operator, the company’s stockholders and private equity firms Apollo and TPG.
Apollo Management and TPG Capital are expected to invest a combined $500 million in cash into Caesars Entertainment as part of the deal, which would create a “growth-oriented entity” controlled by Caesars Acquisition Co., a company created to facilitate the transaction.
Caesars Interactive CEO Mitch Garber will serve as CEO of the acquisition company and continue in his role with the interactive division, which owns the World Series of Poker.
In a statement, Caesars Entertainment, which has long-term debt of more than $20 billion, said the transaction would allow the company to fund growth opportunities in “a less levered and more flexible vehicle.”
Caesars Entertainment Chairman Gary Loveman said the sale of assets into the growth company frees the parent entity from funding various projects under development.
Caesars Entertainment will continue to operate the WSOP, Planet Hollywood, and Horseshoe Baltimore, which is expected to open next year. Caesars also will contribute management fees earned from those businesses into the new entity. The company owns Horseshoe Baltimore in partnership with Rock Gaming of Detroit.
“The transaction is an important step in our ongoing efforts to improve the company’s balance sheet and position ourselves to make strategic investments,” Loveman said. He added that the growth company has a “simple and flexible capital structure.”
“The transaction enables us to raise equity capital at attractive valuations without diluting stockholders of Caesars and provides Caesars additional cash liquidity without incurring new debt,” Loveman said.
Union Gaming Group Managing Director Bill Lerner supported the initiative but said the transaction may underprice the worth of Caesars Interactive. The company operates legal Internet gaming websites under the World Series of Poker brand with partner 888 Holdings. The companies plan to launch pay-for-play World Series of Poker websites in the U.S., including Nevada and New Jersey, as markets open.
“The market clearly applauded the deal with shares of Caesars soaring on the news,” Lerner told investors in a research note.
“A potential criticism is that it undervalues Caesars Interactive, however, since operating metrics are unclear, it’s challenging to back into a market multiple on the purchase,” Lerner said.
Other analysts speculated the growth company could be spun off into a separate publicly traded business at some point. Caesars is expected to own at least 57 percent of the growth company, but the stake could increase to 77 percent.
The transaction requires regulatory approval, including approval from Nevada gaming regulators.
Investors responded positively to the news with shares of Caesars Entertainment gaining $3.41, or 27.3 percent, to close Tuesday at $15.90 on the Nasdaq. Volume was slightly more than 4 million shares, about four times the average.
Contact reporter Howard Stutz at [email protected] or 702-477-3871. Follow @howardstutz on Twitter.
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Copyright 2013 Stephens Media Interactive GamingWire.
The Harrah's in Laughlin NV says:
December 16th, 2013 at 1:21pm
I’m a young African American male, that used to work as a Banquet House Man for The Harrah*s In Laughlin, NV. I was an employee at The Harrah*s for almost 2 years and to be honest with you, that was by far one of the worst jobs I ever worked for! I’ve been verbally abused, Harassed discriminated against almost every single day for the past three months by the Banquet supervisor Kelly Pettus and The Food And Beverage Manager Eric Fox. I called corporate and filed more than 3 complaints against them for discrimination and I also spoke with Human Resources about the situation and they have spoken with other employees that witness these things happening. After I spoke with corporate and Human Recourses, Kelly Pettus Became more furious and she start making up false statements just to write me up and terminate my job, she actually did it twice and the second time I signed the paper because she threaten to fire me Immediately, so I was pressure to sign a false statement and a false write up against me, she worked me from 8-15 hours a day and never let me take any breaks and I have 100% proof. She treated all my co workers like they were Kings And Queens and she treated me like a Peasant, and their was this one time that she came to work very stressed out and she told me how she had really bad experience with black people in her past and she’s really sorry about the way she’s been treating me, but no matter how bad she try to forget about the past and just keep coming back to her every she see someone one of “Color” and I was really offended by what she told me. On November 17th, she asked me to come in on my day off to work a four hour Slot Tournament and after the Slot Tournament was over, she wanted me to take everything out of our warehouse by myself and reorganize the warehouse, clean all the banquet rooms, that was really dirty from a huge party the other night and she wanted me to count, tables, chairs, spoons, salt and pepper, so I did everty thing she asked me to do, except count the salt and pepper because my 8 hours was up about time i was going to get started on the salt and pepper, so I wrote her a note since that was her day off and I told her that I Completed everything except the spoons and the salt and pepper, the next day I walked in to work I got fired ! I sent an email to Dr. Phil And he is willing to set up an interview about employees being Discriminated against. I want KELLY PETTUS AND ERIC FOX FIRED !