Caesars World Raises Stakes in Takeover Fight
Caesars World, fighting Martin T. Sosnoff’s takeover bid, sweetened its proposed cash payout to shareholders Monday under a nearly $1-billion recapitalization proposal, upping the figure to $26.25 from $25. Shareholders are to vote on the plan at a special meeting here June 12.
The $44.3-million increased cost of the one-time special dividend would cause the company to “become even more leveraged” than under the earlier payout figure, the Los Angeles-based operator of three hotel-casinos in Nevada and New Jersey acknowledged. However, it added, its directors believe “there was inherent value which should benefit all shareholders, not just Sosnoff.”
Sosnoff, who owns 13.9% of Caesars’ stock, has bid $32 a share for enough stock to increase his holding to 92.4%. He also has been conducting a mail campaign to oust four top officers from the board. The results are expected next week.
Separately, Caesars reported Monday that its third quarter net profit rose 40%, to $10.7 million from $7.5 million in the same period of fiscal 1986. Third-quarter revenue rose to $197.4 million from $164 million a year ago.
Henry Gluck, chairman and chief executive, said the major contribution to the improvement was at Caesars Palace in Las Vegas, where operating income rose to $24.1 million from $16.6 million. The company said Caesars Atlantic City operating income rose to $10.4 million from $6.4 million, while Caesars Tahoe was in the black for the first time in any third quarter.
Casino earnings offset a $5.3-million special charge against pretax earnings for financial consulting and for legal expenses related to both the March 9 Sosnoff tender offer and company’s recapitalization plan announced April 5, the company said. Sosnoff’s offer originally was $28 a share.
Included among the board’s considerations in deciding to increase its proposed special dividend, the company said, was the belief that Caesars recent market price “does not yet adequately take into account the future value of the equity interest” that stockholders would have in addition to the dividend.
The company’s shares rose $1 Monday to close at $32.50 in composite New York Stock Exchange trading. The stock rose $1.375 to $30.625 immediately after the recapitalization was announced, but the stock has not gone up in succeeding weeks to the extent apparently anticipated by Caesars World.
Caesars said its directors also considered opinions of its financial advisers on the company’s “financial viability” after such recapitalization.
The company said proxy materials on the recapitalization plan are to be mailed to stockholders today.
It said it anticipates that about $960 million will be required to refinance the recapitalization. The company expects to get about $200 million of this through bank borrowings and the rest from selling about $430 million of senior notes and $330 million of subordinated debentures.
Caesars said it has filed a registration statement with the Securities and Exchange Commission in connection with the notes and debentures. The firm’s financial adviser, Drexel Burnham Lambert, has said it is highly confident it can arrange for all of the financing.
