Rumble in the Desert: Lawyers Say Caesars Entertainment’s Buy of Caesars Acquisition Company Could Sheer Shareholders

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Rumble in the Desert Lawyers Say Caesars Entertainment's Buy of Caesars Acquisition Company Could Sheer ShareholdersAs everyone knows, things are getting dicey in casino paradise.

Now shareholder rights attorneys at Robbins Arroyo, LLP are investigating the proposed acquisition of Caesars Acquisition Co. by Caesars Entertainment Corp. Just before the holidays, the two companies made an announcement that they had signed a “definitive merger agreement.”

Under the terms of the agreement, Caesars Acquisition shareholders will receive $8.96 for each share of Caesars Acquisition common stock based on the December 19, 2014 closing price.

The problem? The legal team thinks the deal could sheer the shareholders.

“Robbins Arroyo LLP’s investigation focuses on whether the board of directors at Caesars Acquisition is undertaking a fair process to obtain maximum value and adequately compensate its shareholders,” a statement from Robbins Arroyo LLP reads. “As an initial matter, the $8.96 merger consideration represents a discount of 13.9 percent based on Caesars Acquisition’s closing price on December 19, 2014. This discount is significantly below the median one month premium of nearly 45.8 percent for comparable transactions within the past five years.”

The issue — as always in the casino — is in the numbers.

“On November 10, 2014, Caesars Acquisition released its earnings results for its third quarter 2014, reporting strong quarterly earnings. Total net revenues for the third quarter fiscal 2014 were $485.8 million, compared with $325.8 million for the comparable quarter in fiscal 2013, representing 49.1 percent year-over-year growth,” the statement notes, based on the legal documents. “Adjusted earnings before interest, taxes, depreciation, and amortization (“EBITDA”) for the third quarter fiscal 2014 were $105.4 million, compared with $78.7 million for the comparable quarter in fiscal 2013, representing 74.5 percent year-over-year growth.”

And there are other issues — like forward prospects for the companies.

As Caesars Acquisition Chief Executive Officer Mitch Garber remarked, “Caesars Growth Partners, LLC reported another solid quarter of results driven by year over year growth in both of our operating segments. Our Interactive Entertainment business continues to deliver impressive results, primarily from our market leading social and mobile games business. Overall, we are confident that our strategy of developing new projects in key markets and investing capital to expand and enhance our existing casino and interactive portfolio will drive growth and solid operating results for CGP.”

Why is the Caesars Acquisition’s board of directors choosing to sell the company now rather than let shareholders in on the company’s purportedly rosy future growth prospects?

That’s what the lawyers — and ultimately, the shareholders — want to know.

Lawyers in the case say that Caesars Acquisition shareholders have the option to file a class action lawsuit to ensure the board of directors obtains the best possible price for shareholders.

For more legal details, click here.

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