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Carl Icahn Ups Caesars Stake as He Pushes for Sale

Shares fall despite investor's involvement

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Mar 14, 2019
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Carl Icahn (Trades, Portfolio) this week increased his holding of Caesars Entertainment Corp. (CZR, Financial) as he expands his control of the company in hopes of putting it up for sale.

The Icahn Enterprises founder added 20,724,421 shares of the company Monday, increasing his holding by 20.88%, GuruFocus Real Time Picks shows. The transactions include 5,724,421 shares underlying convertible bonds and 15 million shares underlyi forward contracts. The filing marked Icahn’s third reported buy in a little over a month. He disclosed that he had started the position on Feb. 7, after the company’s stock had tumbled almost 60% over the previous five years. He added to it on March 7.

Icahn's price for the forward contracts was $8.45 per share of the entertainment giant Monday, close to the $8.50 to $8.55 he paid for the March 7 shares and $8.73 to $9.39 range he paid for his initial shares in January and February.

The stock has declined 5.9% since Icahn’s disclosure Monday to close at $8.16 Thursday. It is also down 11.8% from Feb. 7, the date he first announced his position. As of Thursday, he owns approximately 119,975,363 shares of Caesars, good for a 17.75% stake.

Icahn’s share increase came as he muscles for influence with the company to impose his plans. On March 1, he added three directors to its board, with the right to add a fourth member if the board approves a new CEO within the following 45 days, to explore strategic alternatives.

"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 said in a release announcing the board shakeup. “I expect this to make Caesars the most powerful competitor in Vegas, the gaming capital of the world.”

Caesars emerged from bankruptcy in October 2017 after its involvement with a private-equity firm left it with $24 billion of debt in 2015. The new Ceasars Entertainment started operations with less debt and more cash flow, and was restructured into a real estate investment trust.

As of Dec. 31, Caesars’ balance sheet reflected $8.8 billion of debt and $1.5 billion of cash. The company’s revenue jumped 72.4% to $8.39 billion in 2018, boosted primarily by an acquisition. It also posted gains in Ebitdar (earnings before interest, taxes, depreciation, amortization and rent) in both its Las Vegas and other U.S. segments for the year due to increased efficiency and sales. Losses in its international segment mounted to $68 million from $18 million a year prior as it saw lower winnings from games and rising expenses.

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