Caesars Takeover Draws Scrutiny from Law Firm

A New York law firm is renewing its scrutiny of Fertitta Entertainment Inc.’s (FEI) proposed $17.6 billion takeover of Caesars Entertainment (NASDAQ: CZR) that values the target at $31 a share.

Wohl & Fruchter, which specializes in “merger and acquisition cases, securities fraud, consumer fraud, and shareholder derivative actions,” said it’s again examining the deal after a recent Caesars proxy filing with the Securities and Exchange Commission (SEC) indicated the casino giant fielded a $34 per share takeover offer from Carl Icahn.

Caesars’ board of directors supports the Fertitta bid and is making shareholders aware of that endorsement ahead of a Sept. 22 special meeting at which investors will vote on the deal.

Wohl & Fruchter Previously Examined Fertitta Offer for Caesars

Wohl & Fruchter notes that it previously looked into the deal on the basis that Fertitta’s $31 per share offer appeared low.

“Wohl & Fruchter originally launched its investigation because the sale price is well below the price targets of multiple Wall Street analysts before the deal was announced,” noted the firm in the press release.

The law firm isn’t off base with that assertion as some sell-side analysts have said that $31 a share doesn’t adequately value the Harrah’s operator. Prior to the offer being officially revealed, some analysts speculated Caesars should command a takeover price in the mid- to high $30s.

Since the offer was announced, some analysts have halted coverage of Caesars while others have simply assigned the $31 per share takeover bid as their price objectives on the shares, but prior to that announcement, there were price targets of $33 and higher on the casino stock.

Is a Class Action Suit Coming?

In the statement, Wohl & Fruchter didn’t overtly say it’s considering class action litigation against Caesars or FEI, but it does provide an avenue for Caesars investors to reach out to firm and discuss their options, free of charge.

Each merger and acquisition-related class action is different so forecasting what comes of potential litigation against Caesars — if a suit materializes at all — is a fool’s errand.

However, as the Harvard Law School Forum on Corporate Governance points out, many of these cases aren’t litigated in a trial setting because target companies often make supplemental disclosures, leading to voluntary dismissals. That scenario might be off the table with Caesars because the company did disclose Icahn’s $34 per share offer, but it remains to be seen if a class action is pursued and how a court treats disclosure of the Icahn bid.