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Best of Howard Stutz

Gaming Guru

Howard Stutz

Caesars spinoff approved, will have $1.18 billion stock offer

11 July 2013

LAS VEGAS -- State gaming regulators on Wednesday gave initial approval to a plan by Caesars Entertainment Inc. to spin Planet Hollywood Resort & Casino, its interactive gaming business and a planned Baltimore casino into a separate company majority owned by the gambling giant.

Also, Caesars said in a filing with the U.S. Securities and Exchange Commission that it would raise $1.18 billion from selling stock for the new public entity.

The news sent shares of Caesars Entertainment up almost 13 percent Wednesday.

The company, which controls more than 50 casinos and hotels throughout the U.S., including 10 on or near the Strip, said in April that it was creating a new business entity to finance potential growth investments and boost Caesars’ balance sheet.

At the Nevada State Gaming Control Board meeting Wednesday, Caesars Entertainment Deputy General Counsel Michael Cohen said the spinoff would do little to reduce the company’s $21.1 billion in long-term debt.

Cohen said roughly $500 million of the debt, which is tied to Planet Hollywood Resort, would move to the new entity.

“Compared to our capital structure, that’s not a big change,” he said. “Caesars has a lot of debt. We think it’s manageable, but others disagree.”

According to the SEC filing and comments to the control board, Caesars Entertainment and the newly formed Caesars Acquisition are creating Caesars Growth Partners, which includes Planet Hollywood, Caesars Interactive Entertainment and the under-development Horseshoe Casino Baltimore.

In the SEC filing, company officials said they will distribute rights to stockholders to buy as many as 125.4 million shares of Caesars Acquisition at $9.43 per share.

Caesars Entertainment and its private equity owners — TPG Global and Apollo Global Management — will have as much as 70 percent ownership in the new company. The private equity groups are expected to invest $500 million in the venture.

“Nothing really changes (in terms of operation),” Cohen told the control board. “It’s just a new corporate structure.”

Caesars Interactive is potentially one of the company’s most lucrative operations. The business operates the World Series of Poker and the Playtika social gaming segment.

Caesars plans to launch legal and regulated World Series of Poker websites in Nevada and New Jersey.

Caesars Growth Partners also will earn management fees from Planet Hollywood and from Horseshoe Baltimore when it opens in 2015.

Control board members spent nearly an hour exploring the planned spinoff, voting unanimously to approve the action. The Nevada Gaming Commission will make a final ruling July 25.

The activity Wednesday sent shares of Caesars up $1.81, or 12.81 percent, to close at $15.94 on the Nasdaq Global Select.

Since the beginning of the year, Caesars shares have more than doubled in value.
Caesars spinoff approved, will have $1.18 billion stock offer is republished from