After a five-day silence, Caesars World announced Friday that it has rejected as "inadequate" Martin T. Sosnoff's $28-a-share offer for its stock. The Los Angeles-based casino operator said it is studying "alternative transactions."
It listed these as a possible restructuring or acquisition of the company by another firm. The company operates casinos in Reno, Las Vegas and Atlantic City.
But Caesars said it decided not to disclose any "possible terms of any" such proposals, or parties to them, "unless and until an agreement in principle relating thereto has been reached."
In reaction to the news, Caesars' stock rose well above Sosnoff's bid price Friday, closing at $29.375, up $1.375 in heavy trading on the New York Stock Exchange.
Wall Street money manager Sosnoff said later that he was disappointed in Caesars' response. He added that his "primary desire is still to sit down with management to negotiate a friendly acquisition."
May Be a Proxy Fight
Sosnoff, who already owns 13.6% of Caesars stock, reiterated that he believes his offer is "fair to all the company's shareholders."
Caesars' rejection of the offer set the stage for more behind-the-scenes maneuvers that could end in a proxy fight.
"Somehow, some way, Caesars will be taken over," was the flat prediction made by Harold Vogel, a Merrill Lynch securities analyst in New York who follows the casino industry.
"It just looks like it is evolving into a typical battle. We've seen it many times."
His scenario: "Management resists. Someone comes up with a higher bid. If the original one really wants it, he bids it up." Vogel said he had not heard of any specific bidder for Caesars waiting in the wings.
Expands on Report
Neither had Marvin B. Roffman, a Janney Montgomery Scott analyst in San Francisco, who also said that one of a number of alternatives to a higher Sosnoff bid would be a decision by Caesars World to buy back Sosnoff's stock "and negate his deal."
In a filing with the Securities and Exchange Commission on Friday, Caesars provided a longer version of its reaction to the Sosnoff bid.
It said its directors, at a special meeting Thursday, decided the offer was "inadequate and not in the best interests of the company and its shareholders."
Partly on advice of its investment banker, Drexel Burnham Lambert, its directors accept that "if the company were to pursue certain transactions as alternatives . . . the company's shareholders should realize higher values," Caesars said.
The directors recommended that public shareholders not tender any of their shares pursuant to Sosnoff's offer.
While cautiously avoiding a detailed discussion of its alternative, the company's filing cited some fee arrangements with Drexel Burnham that enlarged on the possibilities.
For instance, Drexel Burnham would be entitled to an additional advisory fee "upon the commencement of a proxy contest," or if the company repurchases its own capital stock or sells some or all of its capital stock or assets, acquires assets of another business or if it recapitalizes.
The news release on Sosnoff's reaction late Friday said he urges Caesars management not to take any hasty action that would interfere with the ability of all shareholders to maximize the value of their investment, adding that he still would like to negotiate.
Caesars' filing branded as "without merit" a lawsuit in which Sosnoff accused directors of breach of fiduciary duty and an unlawful plan to enrich themselves in office. The company said it "intends to vigorously defend its position."