Fertitta merger approved by Caesars shareholders

The approval brings the deal one step closer to completion.

On Tuesday, Caesars Entertainment shareholders voted to approve the company’s $17.6 billion merger and take-private by Fertitta Entertainment, clearing a key hurdle to close the massive and complex transaction.

According to Caesars’ 8K filing with the US Securities and Exchange Commission, about 65% of eligible shareholders voted in favour of the deal, which was announced in May. The take-private deal was announced after several months of bidding between Fertitta and Carl Icahn, who had previously built a controlling stake in Caesars and spearheaded its previous sale to Eldorado Resorts in 2020.

As part of the Fertitta deal, Eldorado’s Carano family will retain its equity and the company’s lead management will stay in place. A special meeting for the vote was held on Tuesday at the Eldorado Resort and Casino in Reno, Nevada.

Caesars disclosed in a separate SEC filing on Monday that it had received a demand letter from a stockholder on 15 September that sought to “inspect certain books and records of the company” while alleging that information about its legal representation for the merger was not properly disclosed.

Caesars said the letter and its claims were “without merit” and “immaterial”. But in order to minimise potential delays or incur unnecessary costs, Caesars provided supplemental information about Latham & Watkins LLP to the SEC. Latham served as Caesars’ counsel for the merger but also represents Fertitta founder Tilman Fertitta “in matters unrelated to the merger and to the company”, the operator said. Fertitta’s personal legal fees to Latham are “significantly less” than those Caesars will pay as part of the merger, per the filing.

FTC, financing still up in the air

While the shareholder vote is a key box to check for both sides, there are other steps yet to go to close the deal. One of the biggest outstanding requirements is antitrust approval from the Federal Trade Commission.

The initial Hart-Scott-Rodino antitrust application for the merger was filed to the FTC in July. On 14 September, however, the commission issued a second request to both parties for additional information. As a result of the supplementary request, the HSR review process is extended by 30 days once both sides have “substantially complied” with the order. Caesars’ SEC filing does not disclose the nature of information requested.

Given the overlap in several markets between Caesars and Fertitta’s Golden Nugget brand, it is likely that one or more divestitures will be required to close the deal. The two companies compete in six markets around the US, including three in Nevada — Las Vegas, Lake Tahoe and Laughlin. When the FTC approved the Caesars-Eldorado transaction, it required Eldorado to divest its Lake Tahoe, Bossier City and Kansas City casinos. Separate from that judgement, Eldorado and Caesars also sold off a total of five other properties around the US around that same time.

Flat trading on Wall Street

In addition to competitive concerns, Fertitta may still be exploring financing options for the $6.6 billion package it agreed to under the merger. According to an SEC proxy filing, the senior secured credit facility is comprised of two tranches – a $2 billion revolving credit facility and $4.6 billion in term and bridge loans.

The company told Nevada regulators in July that it was waiting for a “hotter” money market with a “more interest rate friendly environment” to raise the funds, but that has not materialised. The US Federal Reserve raised rates for the first time in three years this month, with the expectation of at least more hike before the end of the year.

Caesars closed on Wednesday at $29.61 a share, down fractionally by 0.03%. Caesars agreed to Fertitta’s bid in May of $31 a share, which represented a 49% premium to its closing price in February when Fertitta made the offer.