Citing the "continued fairness" of its own recapitalization plan, the board of Caesars World recommended Wednesday that shareholders not sell their stock for $32 per share to New York money manager Martin T. Sosnoff.
The Los Angeles hotel-casino company also said it might amend its $1-billion plan, depending on future developments.
Sosnoff had increased his bid from $28 per share on Monday in response to Caesars World's recapitalization plan. Under his $931.2-million offer, Sosnoff would pay $32 per share in cash for 29.1 million shares, giving him 92.4% of the firm. Securities would be exchanged for the remaining shares.
Caesars World Chairman Henry Gluck said the company's financial advisers told the board "that our offer, even with Mr. Sosnoff's $32 offer on the table, was still a fair offer."
"What we're really asking the shareholders is to take a careful look at his offer but also to wait until we are able to mail our proxy materials," which will contain detailed information about the recapitalization plan, Gluck said. The proxy materials are expected to be available in late May. Sosnoff, who holds a 12% stake in Caesars World, can't begin buying stock until June 19.
"We're saying we still feel we have a fair offer on the table, but there's no rush for (shareholders) to do anything at this point," Gluck said.
Sosnoff's spokesman was not available for comment.
Under the recapitalization plan, Caesars World would distribute a $25-per-share cash dividend as well as stock in the reorganized company. Analysts have valued the recapitalization at between $30 and $35 per share.
The rejection of Sosnoff's offer came as no surprise to analysts. But the announcement that Caesars World might consider "appropriate adjustments to the plan, including the amount of the cash dividend" was seen as an indication that the company is willing to raise the value of the recapitalization plan if necessary.
"Taking the current offers, they (Caesars World) think they have the strongest offer," said David Jackson, an analyst with H. J. Meyers & Co., a Beverly Hills investment firm. "I think it's true. I think it is a better offer."
Reserving the right to amend the recapitalization plan lets Caesars World "leave their options open" in case a higher bid is made for the company's stock, Jackson said.
The $1-billion recapitalization would load the company with debt, leaving it with a negative net worth of about $700 million. But Gluck said he is "sufficiently confident" that the company's earnings will be enough "to service our debt and continue our growth without the sale of any assets."
Caesars World owns hotel-casinos in Las Vegas; Lake Tahoe, Nev., and Atlantic City, N.J. It also owns four resorts in the Pocono Mountains of Pennsylvania.