As talks of a possible sale or merger involving Caesars Entertainment continue to gather steam, analysts are beginning to weigh in. Billionaire investor Carl Icahn has been increasing his stake in the company and is now the largest single shareholder, and many believe that his interest is fueled only by the desire to have the company make a drastic change and shed its former self. The Sanford Bernstein brokerage has now commented on what may happen next, pointing out that there are only three companies that could possibly be suitors for the casino operator.
This past Tuesday, Bernstein analysts stated that they believe MGM Resorts, Wynn Resorts or Las Vegas Sands are in the best position to take over the company. It added that Sands would most likely be the only of the three capable of pooling enough cash to make a completely liquid-based acquisition.
All three are not only casino giants in the U.S., but have significant positions in Macau, as well. Wynn is behind Wynn Macau, MGM controls MGM China Holdings and Las Vegas Sands owns Sands China. In each of the cases, the Macau operations are significant contributors to their respective parent companies’ bottom lines.
Bernstein’s Vitaly Umansky, Kelsey Zhu and Eunice Lee add that other companies, such as Penn National Gaming and Eldorado Resorts, carry a lot of debt and have no liquidity, making them unlikely candidates. They could, however, get involved through a reverse merger for stock. The analysts added, “There could be cash funding created via asset sales (but a large portion of the Caesars Entertainment asset base has already been sold).”
Despite being in the best position to purchase Caesars, none of the three best options will most likely consider making a move, at least not in the short term. All three are working on entering the Japan integrated resort (IR) space but could, if those bids fail, turn their attention to Caesars.
The Bernstein analysts further stated, “With the Japan opportunity coming up (where we are talking about US$8-billion to US$10-billion-sized development projects) – we do not believe Las Vegas Sands, MGM Resorts or Wynn Resorts (who are also the more likely candidate to be able to be awarded a licence in Japan) would be interested in picking up Caesars (and not just for reasons tied to Japan) and gaining more exposure to the U.S. regional market and Las Vegas.”
Caesars has been losing ground in the market where it once was a leader—the U.S. It is now considered to be a mid-market company in the U.S. and has continued to lose market share in eight of the nine states where it operates. This has led to individuals such as Icahn—and even the company’s owners—to believe that a sale is the best course of action for the company.