Caesars World, frustrated in its effort to recapitalize the casino's finances, announced Monday that it would begin a tender offer today for 31% of its shares at a price that could range from $29.50 to $34 per share.
The price will be determined by a so-called Dutch auction, which allows shareholders to tender shares at any price in the established range. The highest price paid for the 11 million shares will determine the price paid for all shares tendered, explained Stanley Stein, a first vice president with Drexel Burnham Lambert Inc., the investment adviser on the deal.
Caesars World said it has been informed by Drexel that the investment banker is "highly confident" of its ability to raise $400 million for the stock repurchase and related expenses, through either a private placement or public offering of debt securities.
Caesars has reduced its long-term debt to about $50 million as of July 31, from $280 million on April 30, Stein noted.
Last month, the New Jersey Casino Control Commission rejected a Caesars World $1-billion recapitalization plan, expressing concern that the plan would result in excessive debt and entrench the current managers.
Would Expire in October
Caesars World said Sunday that it has been advised by lawyers that the stock repurchase won't require the prior approval of New Jersey or Nevada regulators. Consequently, the Los Angeles-based casino owner said it won't seek a rehearing or appeal of the New Jersey rejection of its earlier plan.
If regulatory approvals do become necessary, however, the company said it reserves the option not to proceed with the offer, now set to expire on Oct. 5.
The recapitalization plan was prompted by an unsolicited takeover bid by Martin T. Sosnoff, a money manager who had offered $35 per share in cash and notes. In June, however, Sosnoff's three-month effort was halted by a federal judge's ruling that the offer would violate a Federal Reserve Board margin regulation.
Stock Posts a Gain
As of Sept. 1, Sosnoff still held 4.2 million shares, or about 12%, of the 35.2 million Caesars World shares outstanding, a Caesars spokesman said.
Efforts to reach Sosnoff at Manhattan-based Atalanta/Sosnoff Capital were unsuccessful late Monday. The money manager dropped his bid last June, saying that the unsuccessful takeover drive had cost $30 million.
After the New Jersey regulators rejected the Caesars recapitalization plan on Aug. 12, the price of Caesars World shares dropped nearly 15%, down from the $35 range. On Friday, the stock closed at $29.25, up 50 cents, with 181,200 shares changing hands on the New York Stock Exchange.
In a prepared release, Caesars World Chairman Henry Gluck said he thought the offer would stabilize the shareholder base, which appears to have a high percentage of short-term investors who expected a special dividend of $26.25 per share under the recapitalization plan.
Caesars operates three hotel/casinos in Las Vegas, Atlantic City and Lake Tahoe, Calif., and also has four resorts in the Pocono Mountains of Pennsylvania.