Caesars Entertainment's stock continues to trade below the bid from Tilman Fertitta, despite reports that billionaire investor Carl Icahn may be preparing a higher offer. This indicates that investors are skeptical about the likelihood of a competing takeover.
As the deadline for Caesars’ go-shop period approaches, Icahn is reportedly working on a proposal that could exceed Fertitta's $17.6 billion acquisition offer. Bloomberg has indicated that Jefferies Financial Group is gauging interest in around $5 billion in debt financing to support an Icahn-led acquisition. However, no final decisions have been made, and the proposal could still change.
This news follows Fertitta Entertainment's recent agreement to buy Caesars in an all-cash deal valued at approximately $5.7 billion, which includes about $11.9 billion in existing debt, bringing the total transaction value to around $17.6 billion. The agreement allows Caesars a 45-day go-shop period to consider alternative offers until July 11.
Reports suggest that Icahn has already put forth a $33-per-share offer, surpassing Fertitta's $31-per-share bid, with speculation that he may increase his offer to between $35 and $40 per share.
Icahn's interest in Caesars is not unexpected; he built a 15.6% stake in the company back in 2019 and advocated for strategic changes that led to Eldorado Resorts acquiring Caesars in a $17.3 billion deal in 2020.
However, the financing structure of Icahn’s potential bid appears to be more complicated than Fertitta's straightforward offer. It may involve moving certain Caesars assets into subsidiary entities, which would require support from existing creditors. Jefferies has reportedly reached out to these creditors to assemble the necessary financing.
In contrast, Fertitta has already secured debt commitments from a group of about ten banks, giving his offer a significant advantage in execution.
As the go-shop period nears its end, the Caesars board faces a critical decision regarding price versus execution. If Caesars opts out of the Fertitta deal, they would incur a $200 million termination fee, reduced to $100 million if a superior proposal is accepted from an excluded party during the go-shop period. Additionally, under certain regulatory conditions, a $450 million reverse termination fee would apply.
Despite the buzz around a potential rival bid, market reactions indicate that investors remain unconvinced about the emergence of a higher offer. Following a brief uptick of 1.1% after Bloomberg's report, Caesars shares closed at $29.82, below Fertitta's $31 offer and far from the rumored valuation of Icahn's proposal.