Icahn pushes for Caesars sale despite board agreement

1 March 2019

US casino giant Caesars Entertainment has reached an agreement with Carl Icahn, which will see the activist investor support all proposed board nominations at the operator’s 2019 Annual General Meeting.

However Icahn, who was last week revealed to have built up a 9.8% stake in Caesars, has reiterated his calls for the board to pursue a merger or a sale of the business.

As a result of the agreement a trio of new directors have been appointed to Caesars’ board. Keith Cozza, chief executive of Icahn’s Icahn Enterprises conglomerate, Icahn Enterprises director James Nelson and Courtney Mather, portfolio manager for the investor’s Icahn Capital fund, all join with immediate effect.

Mather and Cozza will serve until the 2019 AGM, at which point shareholders will vote on whether to extend their terms, while Nelson will be up for re-election in 2020. As a result of the trio of appointments, three unnamed existing board members are to step down.

Icahn will have the option to add a fourth director to the board if Caesars fails to select a candidate to replace outgoing chief executive Mark Frissora within 45 days of the agreement.

"Our new colleagues bring diverse and relevant experience, and we look forward to them joining our board in our ongoing efforts to further enhance value for all shareholders,” Caesars board chairman James Hunt said of the new appointments.

"Since the completion of Caesars' restructuring, we have been undergoing a strategic process to create value, and we will continue that process working with our new directors,” he explained. ”On behalf of the entire board and Caesars' nearly 68,000 employees, I want to thank our departing director colleagues for their distinguished and tireless service to the company.”

In connection with the operator’s 2019 AGM, which is yet to be scheduled, the Caesars board is to put forward a series of enhancements to its governance processes. Shareholders will be asked to vote on a proposal to allow those with a holding of at least 15% to call a special shareholder meeting. Another proposal, to prohibit the adoption of a shareholder rights plan with a triggering threshold of below 20% of outstanding shares, will also be put forward.

The agreement with Icahn has been reached as he pushes for the operator to pursue a merger or sale. A sale, Icahn said in a regulatory filing to the Securities and Exchange Commission last week, would enhance shareholder value.

In the filing, Icahn also stated that he expected Caesars to refrain from appointing a permanent CEO, or extending current CEO Mark Frissora’s tenure, until he had engaged with the board. It has been widely reported in the US media that Icahn has proposed Tony Rodio, currently chief executive of Affinity Gaming and former CEO of Tropicana Entertainment, as Frissora’s replacement.

Following his agreement with the board, Icahn reiterated his belief that a sale was the best way forward for the business.

"I believe the best path forward for Caesars requires a thorough strategic process to sell or merge the company to further develop its already strong regional presence, which will allow Caesars to continue to take advantage of the Caesars Rewards program bringing more and more players into Caesars' Vegas market,” Icahn explained.

“I expect this to make Caesars the most powerful competitor in Vegas, the gaming capital of the world,” he continued. “Caesars would be a great opportunity for certain investors who have already expressed interest, and I'm glad the board will explore these opportunities. 

“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."