Caesars Palace Hotel and Casino in Las Vegas, Nevada, USA, on Saturday, June 1, 2024.
Rhonda Churcill | Bloomberg | Getty pictures
Company: Caesars Entertainment Inc (CZR)
Business: Caesars Entertainment is a diversified company for games and hospitals that work through several segments: Las Vegas, Regional, Caesars Digital and Managed and Branded alongside companies and others. The properties of the Las Vegas segment include Cromwell, Flamingo Las Vegas and the Linq Hotel & Casino. The regional properties include Circus Circus Reno, Grand Victoria Casino and Horseshoe Baltimore. The managed and branded real estate includes Harrah's AK-Chin, Harrahs Cherokee and Harrahs Cherokee Valley River. The resorts work mainly under the brand names of Caesar, Harrahs, Hufeisen and Eldorado. It offers diversified amenities, goals, goals and a complete series of mobile and online games and sports betting experiences.
Market value: USD 5.8 billion ($ 27.36 per share)
Stock Diagram -iconstock -Igram -Symbol
Caesar's entertainment in the past 12 months
Activist: Carl Icahn
Property: 1.15%
Average costs: n/a
Activist comment: Carl Icahn is the grandfather of shareholder activism and a real pioneer of strategy. He is very passionate about shareholder rights and good corporate management and will make extreme efforts to combat incompetent board of directors and management teams to protect the shareholder value. Icahn has invested in all sectors in his career long for more than six decades, and he has an enormous story in which casinos creates added value. In 1998, Icahn acquired the stratospheric casino operations, stated that she grew around a decade later for more than 1 billion US dollars. In 2008 Icahn acquired an interest in Tropicana, when it was bankrupt, brought in new leadership and structured it and structured it in April 2018 for $ 1.85 billion. And of course he announced a participation in Caesars in 2019, replaced the Tax CEO Mark Frissora and orchestrated the Eldorado fusion.
What happens
At the beginning of this month, Carl Icahn and Caesars achieved an agreement in which the company agreed on the size of the board of directors on 12 directors and the appointment of Jesse Lynn (General Counsel of Icahn Enterprises) and Ted Papapostolou (Chief Financial Officer from ICahn Enterprises) as directors of the company's company. Icahn agreed to adhere to certain usual standstill and voting provisions.
Behind the scenes
This is not Carl Icahn's first trip in Caesars. In February 2019, he submitted a 13D in which he believed that the board should carry out a strategic review in order to be a sale of the company as an optimal way to add the shareholders. On March 1, 2019, Icahn and Caesars concluded a appointment and nominating agreement from the director, after John Bouthy, Matthew Ferko and Christopher Williams, and James Nelson, Courtney Mather and Keith Cozza were appointed to fill the resulting vacancies. On July 20, 2020, Caesars merged with Eldorado to Caesar's entertainment with the support of Icahn. Courtney Mather is still on the board of Caesars, but no longer works for Carl Icahn.
Since the merger, Caesars has been trying to strengthen his balance sheet, pursue strategic sales and acquisitions and to stretch together with the rest of the gaming industry from inpatient Mortar in the growing digital gaming market. Many of these initiatives were successful and some disappointing. On October 1, 2021, the Caesars share price exceeded $ 119 per share. Now, almost five years later, the share declined below the price when Icahn flew together Caesars with Eldorado in 2020 – in the heart of Covid – despite the increase in sales of 9.6 billion US dollars in 2021 to 11.2 billion dollars today and the operating result of these respective periods. Icahn clearly sees a great business at a very attractive price.
Icahn and the company have recently concluded an agreement in which Caesar expanded the size of the board of directors to 12 and Jesse Lynn (General Counsel von Ikahn Enterprises) and Ted Papapostolou (Chief Financial Officer from Icahn Enterprises) appoint the company's board. In the press release in which this agreement was announced, Icahn explained that you “look forward to the cooperation [management] And the board, in order to maximize the value for all shareholders, also by examining strategic alternatives for the underestimated digital business of the company. “
A spin -off of Caesars Digital makes sense for several reasons. In 2024, Caesars Digital generated sales of 1.16 billion US dollars and made up 10.3% of the company's total turnover. This was growth of 19.5% compared to the previous year and 112.2% growth since 2022. Digital's Earnings Before Interest, Taxes, Depreciation, Amortization, and Restructuring or Rent Costs (EBITDAR) Has Surged 207.9% from 2023 to 2024, with Projects of Another 160.9% Increase in 2025. and regional), Have Remained Stagnant, with RevenUe Declining 2.34% from 2023 and 1.78% compared to 2022. The EBITDAR has also dropped by 6.56% or 5.87% over the same periods, and consensus estimates predict a similar trend. These are clearly two companies at very different points in their growth cycles, which makes it difficult for the market to rate them fairly as a single unit. Caesars is currently dealing with EBITDA 8.43 times, while digital colleagues from Caesars digital trade to 25 times. The application of this multiple area to $ 305 million from 2025e -adjusted EBITDA would pay a company with a value of approx. 4.6 billion to $ 7.6 billion. Since digitally only makes up 3% of the current EBITDA of the company, this separation would open up a lot of value, since the independent evaluation of digitally 15% to 25% of the entire current company value of the company would make up – significantly higher than the implicit assessment in Caesars. This separation would also give investors the opportunity to invest in a consistent legacy casino business or a riskier digital digital business with high growth. This also does not have to be a clear sale nor a spinoff. Icahn is one of the most creative investors of all time, and his two candidates will probably work to find out what is the best structure for shareholders. For example, the company could keep part of digital business or conclude an agreement with the new company by managing the business.
Carl Icahn knows a lot about the casino business. He had an enormous story in which he creates added value in the casinos. In 1998, Icahn acquired the stratospheric casino operations, stated that she grew around a decade later for more than 1 billion US dollars. In 2008 Icahn acquired an interest in Tropicana, when it was bankrupt, brought in new leadership and structured it and structured it in April 2018 for $ 1.85 billion. And of course he announced a participation in Caesars in 2019, replaced the Tax CEO Mark Frissora and orchestrated the Eldorado fusion. So there is no other activist who is more qualified to create a value in a company like Caesars. The stealth nature and structure of the agreement in addition to the comments between Caesars and Icahn point out that this is a very favorable agreement and that Icahn is confident of the ability of management. While CEOs generally do not like to split assets, all the signs are that the management of Caesars is receptive to this strategy.
Icahn is not a micr -manager and trusts his people and management to perform effectively. This was an area for activism with Icahn protege Keith champion on the board of MGM, two activists in Penn Entertainment and two other activists in Entain with the founder of Eminence Ricky Sandler on the board. This industry is at a turning point with the beginning of interactive games. The companies that better navigate this – probably through acquisitions and alliances and without significant weakening their balance sheets – will be the winners. I am not sure whether you can have a better ally in this type of initiative than Carl Icahn.
Ken Squire is the founder and president of 13D monitor, an institutional research service for shareholders, and the founder and portfolio manager of the 13D Activist Fund, an investment fund that invests in an activist 13D investment.