Caesars Entertainment, Caesars Acquisition To Merge In All-stock Deal

(RTTNews) - Casino giant Caesars Entertainment Corp. (CZR) and Caesars Acquisition Co. (CACQ) said Monday that they have agreed to merge in all all-stock deal. The merged company will conduct business as Caesars Entertainment and continue to trade on the Nasdaq under the ticker "CZR".

Shares of Caesars Entertainment and Caesars Acquisition are gaining 22 percent and 11 percent, respectively, in pre-market trades, following the announcement.

The companies noted that their planned merger will also support the proposed restructuring of Caesars Entertainment Operating Co. Inc. or CEOC, a subsidiary of Caesars Entertainment.

Gary Loveman, Chairman and Chief Executive Officer of Caesars Entertainment said, "The merger of Caesars Entertainment and Caesars Acquisition solidifies our focus on owning assets in destination and high-growth markets and businesses, while maintaining the benefits of operating our network and the Total Rewards loyalty program."

Las Vegas, Nevada-based Caesars Entertainment is mainly comprised of three entities - the majority-owned operating subsidiary CEOC, wholly-owned Caesars Entertainment Resort Properties, and Caesars Growth Properties.

Caesars Acquisition or CACQ was formed to make an equity investment in Caesars Growth Partners, a joint venture between CACQ and Caesars Entertainment.

Caesars Growth Partners is a casino asset and entertainment company focused on acquiring and developing a portfolio of high-growth operating assets as well as equity and debt investments in the gaming and interactive entertainment industry.

Under the terms of the deal and subject to the overall restructuring of CEOC, each outstanding share of Caesars Acquisition class A common stock will be exchanged for 0.664 share of Caesars Entertainment common stock.

Caesars Entertainment stockholders will own about 62 percent of the combined company on a fully-diluted basis, while Caesars Acquisition stockholders will own the remaining about 38 percent stake. No new debt will be issued in connection with the merger.

The merged company will continue to be controlled by affiliates of private equity firms Apollo Global Management and TPG Capital. Based on each of the company's records, about 90 percent of the stockholders of Caesars Entertainment also own shares of Caesars Acquisition, and vice versa, thus implying significant overlap in the stockholders of the two companies.

Upon completion of the merger and the proposed restructuring of CEOC, Caesars Entertainment will own a collection of high-growth assets, including properties in destination markets and a majority stake in Caesars Interactive Entertainment, Inc. or CIE. It will also operate a network of domestic and international resorts and casinos.

Caesars Entertainment will operate Caesars Palace and own 11 properties in Las Vegas, including nine casino resorts as well as the LINQ promenade and High Roller observation wheel. Further, the merged company will own CIE, Harrah's New Orleans, Harrah's Atlantic City, Harrah's Laughlin and Caesars Acquisition's current equity interest in Horseshoe Baltimore. All of the company's properties will remain connected via the Total Rewards loyalty network.

On a pro-forma basis, the merged company will have a combined market capitalization of $3.2 billion, based on closing prices on December 19, 2014. It will also have a combined cash balance of $1.7 billion, excluding cash at CEOC.

In early March, Caesars Entertainment said it agreed to sell four casinos to its affiliate Caesars Growth Partners, LLC for $2.2 billion. According to the company, the sale represented the first of its anticipated steps to address overall capital structure at its subsidiary COEC, and position that unit to enhance equity value. Caesars Entertainment was working to restructure more than $20 billion in debt at that time.

CZR closed Friday's trading at $13.49. In Monday's pre-market activity, the stock is up $3.01 or 22.31 percent to $16.50.

CACQ closed Friday's trading at $9.46. In Monday's pre-market activity, the stock is up $1.07 or 11.35 percent to $10.50.