Sosnoff Makes Bid for Rest of Shares in Caesars World
New York money manager Martin T. Sosnoff made an offer Monday to pay $28 a share cash--or a total of about $725 million--for all the stock of Caesars World he doesn’t already own. Sosnoff already holds 13.6% and is the largest shareholder in the Los Angeles-based operator of hotel-casinos in Las Vegas and Atlantic City.
Notice of Sosnoff’s offer was made by means of an advertisement in Monday’s Wall Street Journal, with no prior word given to Caesars World Chairman Henry Gluck.
Later in the day, the New Yorker told Gluck in a letter that he went directly to stockholders at the “urging” of financial and legal advisers, who stressed past “lack of responsiveness” by Caesars management that included two rebuffs of his requests for board representation.
Gluck said in a brief public statement Monday afternoon that his directors would study the unsolicited tender offer with legal and financial advisers before making any recommendation to stockholders.
Gluck further “urged that shareholders not take any action with respect to the offer prior to the board’s recommendation,” the statement said.
On the New York Stock Exchange, Caesars World stock jumped $3.25 a share Monday to close at a new high of $27.75.
The company, whose earnings rose 45% to $27.5 million in the six months ended Jan. 31, owns Caesars Palace and Caesars Tahoe in Nevada and Caesars Atlantic City in New Jersey.
Sosnoff said his offer is conditioned upon financing, some of which he said has already been lined up. It is also conditioned upon sufficient shares being tendered to give him majority ownership and upon clearances by Nevada and New Jersey gambling regulators.
Other Investments
If he succeeds in buying control of Caesars, Sosnoff will be going against his longtime pattern of being a “passive” investor in companies.
In the past, he has bought more than 5% of at least two Southern California savings institutions, as well as major stakes in such national corporations as New York Times Co., Chrysler Corp., Loews Corp. and Triangle Industries.
Last year, he sold about $60 million of stock and convertible debentures to the public in his own investment management firm, Atalanta/Sosnoff Capital Corp. The underwriter was Drexel Burnham Lambert, which is Caesars World’s investment banker. Sosnoff’s underwriter on the new offer for Caesars, however, is PaineWebber.
At Caesars World, Sosnoff has been a fairly low-profile stockholder since 1983, the same year Gluck was picked as chairman.
Sosnoff became Caesars’ largest shareholder after the company’s buyout of its former top officers and controlling shareholders, brothers Clifford and Stuart Perlman.
Letter to Chairman
Without much public display, Sosnoff has, since late 1985, increased pressure on Caesars World management and raised his stake in the company. He sought and obtained clearance from antitrust regulators to raise his share in Caesars to as much as 15% and last September filed to raise that to as much as 25%.
He reportedly did not attend the company’s annual meeting here last December, and his stake is believed to have been included in the 16% that the company listed at the meeting as having withheld a vote in the balloting on an unopposed management slate of directors.
On Monday, Sosnoff made public the text of a lengthy letter delivered to Gluck at Caesars headquarters. It noted that Sosnoff has previously been found suitable by Nevada and New Jersey regulators to be a major shareholder.
The letter also said Marine Midland Bank of Buffalo, N.Y., has committed itself to lend $100 million and to use its best efforts to syndicate an additional $400 million in loans to make up the senior financing. Beyond that, it said, the investment firm of PaineWebber has told him it is “highly confident” it can arrange commitments for up to $475 million of financing.
Therefore, Sosnoff said, he believes that the conditions to his offer “will not impose any significant impediment to my completing the acquisition.”
The letter said the offer, priced at a “significant premium over current and historical market values” for Caesars’ stock, was a “fair and generous” one and available to all company shareholders.
Praises Management
Notwithstanding their past relations, Sosnoff went on, he hoped that Gluck and his management would be willing to sit down with him and “negotiate a definitive acquisition agreement.” It added:
“As I have indicated publicly in the past, I believe operating management of the company has performed well and that appropriate consideration should be given to a significant equity interest for them in the company following the acquisition.”
Moody’s Investors Service said Monday that it is reviewing Caesars World’s subordinated debt ratings “for possible downgrade” because of the Sosnoff offer. If successful, the service said, “the bid could result in a significant increase in Caesars’ leverage.”
Moreover, Moody’s said, it will analyze the company’s operating performance “in the increasingly competitive gaming industry to determine the adequacy of cash flow to service an increased debt load and to cover capital spending.”
