Icahn Caesars Offer Unlikely to Thwart Fertitta Bid

Shares of Caesars Entertainment (NASDAQ: CZR) slipped Wednesday on news that Carl Icahn may not be able to mount a takeover offer that compels the casino operator to look away from the bid it has in hand from Tilman Fertitta.

Late Tuesday, reports surfaced indicating Icahn is attempting to swoop in with a competing offer for the gaming company, possibly at $35 to $40 a share. Investment bank Jefferies is rumored to be talking with investors about their appetite for $5 billion in debt financing that would support an Icahn offer. Today, it appears the activist investor is readying a $33 a share bid for Caesars, closer to the $31 per share offer from Fertitta the gaming company’s board is urging shareholders to accept. Due to debt complexities, Icahn may not be able to compel the Caesars board to move away from the Feritta proposal.

Including the assumption of Caesars’ $11.9 billion in liabilities, Fertitta’s offer values the target at $17.6 billion and he’s already procured financing from approximately 10 banks for the debt side of the deal, indicating his offer may be on firmer ground today than a competing pitch from Icahn.

Time Not on Icahn’s Side

As Casino.org reported Tuesday, Icahn’s acquisition offer likely involves approaching Caesars bondholders about moving some of the gaming company’s assets into an unrestricted subsidiary — an entity from which creditors may not be able to derive adequate compensation in a change of control scenario.

That implies the activist investor’s offer carries a level of complexity not associated with the Fertitta bid and those complexities could make it difficult for Icahn to get to the finish line because Caesars’ 45-day go-shop period expires on Saturday.

The CNBC report suggests Icahn is in fact attempting to bring a bid forth for Caesars, but it also indicates the Wall Street raider’s effort only recently started in earnest. That may be a sign there simply isn’t enough time for him to launch a more complex offer and convince the gaming company’s board to endorse it.

Since the Fertitta offer was revealed in late May, the consensus among sell-side analysts has been that it undervalues Caesars, but that it was unlikely competing bids would materialize.

Caesars Might Have to Listen to Icahn

Assuming Icahn can mount a credible takeover offer before Saturday, Caesars may have no choice but to at least listen to the proposal because the investor holds some sway at the company.

After restarting an equity position in the Harrah’s operator in 2024, Icahn’s Icahn Enterprises holds close to 5% of the gaming company’s shares outstanding. Last year, Jesse Lynn, general counsel of Icahn Enterprises, and Ted Papapostolou, chief executive officer of that company, were added to Caesars’ board.

The casino company hasn’t revealed how individual directors view the Fertitta offer aside from telling investors that in aggregate, the board supports that bid.