Las Vegas Casino Giants MGM and Caesars Reportedly in Merger Talks

New round of merger reports link Caesars to MGM; potential tie-up will create a $20-plus-billion hotel and casino behemoth

Las Vegas casino giants MGM Resorts International and Caesars Entertainment Corp. are reportedly discussing a merger to create a behemoth company that would control about half of the Las Vegas and Atlantic City gaming and hospitality markets, the New York Post reported citing unnamed sources familiar with the ongoing talks.

News about a potential merger of the two operators arrive shortly after it became known that Caesars has rejected a reverse takeover offer from businessman Tilman Fertitta, owner of the smaller Golden Nugget hotel and casino chain. Caesars said during its Q3 financial results conference last week that Mr. Fertitta’s offer was not consistent with [the company’s] plans to create and enhance shareholder value.”

According to NY Post sources, MGM has tapped investment bank Morgan Stanley and law firm Weil, Gotshal & Manges to study a potential merger with Caesars. However, there is still no offer on the table, sources have pointed out.

People familiar with the matter have also revealed that activist hedge funds, which collectively own about a quarter of Caesars, have been pushing for a MGM tie-up for some time now. A merger of the two operators would create a behemoth gambling giant with a market capitalization of more than $21 billion. According to the NY Post’s sources, Canyon Partners, which owns shares in both Caesars and MGM, is among the hedge funds supporting a deal between the two companies.

It is also important to note that in the case of a merger, MGM and Caesars will together own about a half of all Las Vegas and Atlantic City hotel rooms, which could result in competition authorities raising concerns over the impact of a potential tie-up.

Caesars Sacks CEO to Pave Way for Sale

During its Q3 financial results conference last week, Caesars announced that its CEO and President, Mark Frissora, would step down in February 2019 after three years at the operator’s helm. According to the NY Post, Mr. Frissora was actually dethroned because he was largely opposed to the company’s sale and his opinion on the matter was clashing with that of investors.

Sources believe that Apollo Global Management, which together with TPG Global are currently Caesars’ largest shareholders, supports a sale. In addition, reports emerged not long ago that hedge fund HG Vora Capital Management has quietly built a nearly 5% stake in the Las Vegas casino giant and has been trying to persuade it to consider divestiture of assets or an outright sale.

According to the NY Post, Caesars might be having other suitors besides MGM. Sources believe that Wynn Resorts and Malaysia’s Genting Group could, too, be interested in a tie-up with the Las Vegas gambling giant. Private equity firms that hold licenses to operate casino might, too, be in the mix, according to sources. The Blackstone Group, which purchased Spanish gambling company Cirsa earlier this year, was mentioned as one such private equity firm that might be eying Caesars.

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