In an era of mergers and endless merger rumors, with Marriott International and Starwood Hotels & Resorts perhaps at its peak, one possibility reported by the New York Post on November 5, 2018, includes the two top names in Las Vegas and Atlantic City—Caesars Entertainment Corp. and MGM Resorts International.
According to the report, MGM has hired investment bank Morgan Stanley and law firm Weil, Gotshal & Manges to start studying the option of a merger between the two brands. The New York Post cited a gaming source close to the situation, though neither side could be reached by the publication for comment.
It did go on to say that no offer is currently on the table, according to sources.
According to the report, activist hedge funds, which together own about a 25 percent chunk of Caesars, have been pushing for an MGM deal, purporting that Caesars shares are off 25 percent year to date.
Meanwhile MGM shares are down 15 percent year to date.
These funds, including Canyon Partners, which holds leading stakes in both companies, were seen to be behind the upcoming departure of Caesars president and CEO Mark Frissora, who announced last week he was resigning from his position effective February 8, 2018.
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Chaney Sheffield, an ex-Morgan Stanley investment banker who heads Canyon’s lodging and gaming investments, is reportedly advocating for the merger, the New York Post article said, with the unnamed sources pointing to an opportunity to save money on overhead and marketing.
If combined, MGM and Caesars would own about half the hotel rooms in Las Vegas and Atlantic City. According to the New York Post, MGM’s enterprise value, equity plus debt, is $30 billion, and Caesars stands at $22 billion.
The report of the potential merger quickly followed Caesars rejecting a reverse takeover offer from businessman Tilman Fertitta, owner of the Golden Nugget hotel and casino chain, according to Casino News Daily. The article also noted that Caesars said Fertitta’s offer was “not consistent with [the company’s] plans to create and enhance shareholder value,” during its Q3 financial results conference.
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David Schwartz, director of the Center for Gaming Research at the University of Nevada, Las Vegas, told CBS-affiliated local and television news outlet Las Vegas Now that a Caesars-MGM merger would give the combined company an “overwhelming presence” in Las Vegas.
“I think these companies are always exploring their options through things like this,” Schwartz said. “They’re always looking at mergers and consolidations, so it’s not really surprising MGM would be considering this."
According to the New York Post, other options may be on the table for Caesars. Wynn Resorts, at $18 billion enterprise value, may be a player if it gets to keep its license to build a Boston-area casino, sources said.
Malaysia’s Genting Group, which owns Resorts World at Aqueduct Racetrack, could also be in the mix, as well as private equity firms that have a license to operate casinos, like The Blackstone Group, sources said.