With major investors joining Carl Icahn in pushing for a sale of Caesars Entertainment, the billionaire financier reached an agreement with the Las Vegas-based gaming giant for representation on the board of directors in a move that is likely to accelerate the search for a buyer.
The deal gives Icahn three board members— Keith Cozza, Courtney Mather and James Nelson—with the opportunity to appoint a fourth if the company’s CEO search doesn’t find a candidate acceptable to Icahn within 45 days. Caesars has been conducting a nationwide search to replace Mark Frissora for six months now. Frissora’s contract was recently extended through April.
But after initially calling on Caesars to halt the search, he now is proposing industry veteran Tony Rodio, who worked for him at Tropicana Entertainment as CEO, for the position.
Rodio worked for him from 2011 to 2018 at regional operator Tropicana Entertainment and was chief executive and a member of the Tropicana board when Icahn sold the company and its seven casinos last year for $1.85 billion to Eldorado and Penn National Gaming’s Gaming & Leisure Properties REIT.
Rodio moved to privately held Affinity Gaming, where he was named CEO in October. Affinity owns three Nevada casinos, including one in Las Vegas, and casinos in Colorado, Missouri and Iowa.
Caesars already has a shortlist of candidates but has indicated it’s willing to consider Rodio, according to Reuters, which cited sources who said the company also might offer Rodio the vacant position of chief operating officer as an alternative.
Widely respected in the industry, Rodio served more than three decades in the Atlantic City market and has held managerial positions with Hollywood Casino and Harrah’s Entertainment, which was later sold to form the conglomerate that is now Caesars. At Tropicana he was credited with overseeing improvements that helped boost revenues by 50 percent.
“Caesars would be a great opportunity for certain investors who have already expressed interest, and I’m glad the board will explore these opportunities,” Icahn said in a release. “Independent of strategic alternatives, I believe Caesars should also be focused on leadership succession, disciplined capital allocation, improving operating performance and optimizing real estate and other assets.”
Last week, Caesars’ largest investor issued a statement backing the corporate raider’s desire to see the company sold.
“Shareholder value would be best served and enhanced by an open sale process that will be presented to shareholders for a vote thereon,” said hedge fund Canyon Partners, which owns some 70 million shares, good for 10 percent of Caesars’ equity, according to Bloomberg data.
OppenheimerFunds issued a similar statement, aligning its 10 million shares with the activists.
The pressure is not expected to subside despite a fourth-quarter performance that surprised analysts on the plus side.
Caesars, which owns or operates 40 casinos in 13 states, grew total revenue by 11.3 percent to $2.12 billion in the three months ended December 31, boosted by the inclusion of two Indiana racetrack casinos the company acquired last summer. Revenue also was up a solid 7.8 percent in Las Vegas, where Caesars operates 10 resorts on or around the Strip, highlighted by a 10.9 percent jump in hotel room revenue. Cash flow company-wide was up 18 percent. Net income worked out to $198 million, good for 29 cents in earnings per share.
“A very good quarter, against reasonably muted expectations” is how Credit Suisse gaming analyst Cameron McKnight described it.
For all of 2018, revenue came in at $8.39 billion, and the company reversed a $368 million net loss to turn a profit of $303 million.
Frissora did not specifically address the sale pressure in a conference call with investors and analysts to discuss the results.
“We regularly engage with shareholders and we value their input,” he said in prepared remarks. “We intend to carefully evaluate Mr. Icahn’s suggestions, including his request for board representation, and will provide updates in due course.”
Caesars has responded to the activists by saying the company is open to “strategic alternatives,” including a sale, if the right offer comes along.
Billionaire Tilman Fertitta, owner of Landry’s restaurants and the NBA’s Houston Rockets, has proposed a reverse merger with his much-smaller Golden Nugget casino chain which would place him in command of both companies, but Caesars rejected the plan, valued at the time at roughly $13 a share, as inadequate. It’s been reported that regional operator Eldorado Resorts also explored a bid last year but didn’t make an offer.
Icahn, who earlier this month disclosed a 9.8 percent interest in Caesars, has owned a number of casinos over the years, although his only holding currently is the shuttered Trump Plaza Hotel and Casino in Atlantic City, which has been closed since 2014.
