Renewing his quest to obtain control of Caesars World, New York money manager Martin T. Sosnoff on Wednesday increased his unsolicited tender offer for the casino operator to $35 a share from $32. The renewed bidding for the Los Angeles-based company boosted its stock by 37.5 cents a share to a new high of $34.675 in New York Stock Exchange trading.
An additional lure offered by Sosnoff is a 30% equity interest in the company in the form of preferred stock. A "recapitalization" proposal by Caesars' management provides for a $26.25-a-share cash dividend, leaving the company heavily in debt.
Sosnoff would not have to increase the $930-million cash outlay contemplated in his previous $32-a-share proposal, because he reduced his target stake to a total of 85.6% from 92.4%. He already owns 13.9%.
Caesars spokesman Jack Leone said the company was studying the proposal and had no immediate comment. The company has called a special stockholders meeting for June 12 to vote on its proposal.
The movement in the company's stock Wednesday indicated some interest among institutional investors for Sosnoff's effort to woo them from management's plan.
Interestingly, the trading volume in Caesars' "stub" was more than double that of the company's stock on the Big Board on Wednesday, 953,000 versus 402,000 shares. The stub price, which declined 12.5 cents to $8.50 a share, indicates the value that Wall Street places on the company after recapitalization and with the $960 million of new debt that management plans to incur to pay the special dividend. The stub is traded on a when-issued basis.
Sosnoff presumably wanted to counter the apparent popularity of retaining equity under management's plan. The announcement of his new offer quoted him as saying:
"I believe this offer represents a superior financial alternative to the plan of recapitalization, which was adopted and revised by the board of directors in a defensive effort to prevent me from purchasing control of Caesars World.
"So long as management doesn't now take hasty action to unfairly foreclose the auction process, Caesars' shareholders will be able to enjoy this superior value."
Sosnoff, whose first bid was made last March, has now increased the offer twice. Management countered his last raise with an increase in the proposed cash dividend to $26.50 a share.
David Jackson, research director of H. J. Meyers & Co., a Beverly Hills investment firm, said there is now "not a whole lot of difference" between the Sosnoff offer and the company's recapitalization plan. He said the current figures "must be getting near" the true value of Caesars.
Institutions hold something like half of the outstanding shares in Caesars, and Sosnoff is its largest individual shareholder. Management does not hold a large amount of its stock.