LAS VEGAS, April 23, 2013 -- Caesars Entertainment
Corporation ("Caesars") (NASDAQ: CZR) today announced that its
Board of Directors has approved the material terms of a strategic
transaction intended to improve the company's capital structure and
provide support for new projects. As part of the transaction, Caesars
will form a new growth-oriented entity, Caesars Growth Partners,
LLC ("Growth Partners"), to be owned by Caesars and participating
Caesars stockholders. The transaction is intended to provide capital to
allow Caesars to continue to fund growth opportunities in a less
levered and more flexible vehicle than its existing operating
subsidiaries. In addition, the transaction will result in a cash
infusion into Caesars
Entertainment Operating Company, Inc. ("CEOC") from the sale of
certain assets to Growth Partners, while also freeing CEOC
from funding future equity contributions required for certain projects
under development.
"The transaction is an important step in our ongoing efforts
to improve the company's balance sheet and position ourselves to make
strategic investments," said Gary W. Loveman, Chairman,
President and Chief Executive Officer of Caesars Entertainment. "Caesars
Growth Partners and its simple and flexible capital structure
provide us with a vehicle to pursue growth opportunities while
retaining a significant portion of the financial upside associated with
these assets and projects. The transaction enables us to raise equity
capital at attractive valuations without diluting stockholders of
Caesars and provides Caesars additional cash liquidity without
incurring new debt. I am pleased that our Sponsors, TPG and Apollo,
have chosen to express their confidence in our current position and
future opportunities through their new investment."
The operating assets contributed or sold by Caesars will be
held by Growth Partners. Participating Caesars
stockholders, including the Sponsors, will own their interests in Growth
Partners through Caesars Acquisition Company ("CAC"),
a company created to facilitate this transaction.
In connection with the transactions, Caesars intends to
distribute subscription rights at no charge to Caesars' stockholders on
a pro rata basis. Funds affiliated with Apollo Management, L.P. and TPG
Capital L.P. (the "Sponsors") have advised Caesars that they each
intend to invest $250 million
in CAC, though they have not entered into any agreement to do so. The
consummation of the transaction will be contingent on such investment
from the Sponsors. The subscription rights will afford each stockholder
of Caesars the right to acquire for cash at least the same pro rata
ownership interest in CAC as such stockholder holds in Caesars. The
subscription rights are expected to be transferable by Caesars
stockholders. CAC could receive approximately $1.2
billion if all subscription rights are exercised in
full. All stockholders who elect to invest in CAC, including the
Sponsors, will do so on the same terms.
CAC will use the proceeds from its sale of shares to acquire
all of the voting interests in Growth Partners. Caesars and
its subsidiaries will contribute to Growth Partners their
shares of Caesars Interactive Entertainment, Inc. and
approximately $1.1 billion
face value of senior notes issued by CEOC that are held by a subsidiary
of Caesars in exchange for non-voting membership interests.
Additionally, Growth Partners intends to use proceeds
received from CAC to purchase from a Caesars subsidiary the Planet
Hollywood Resort & Casino in Las Vegas,
Caesars' joint venture interests in a casino under development in Baltimore (Horseshoe
Baltimore) and a financial stake in the management fee stream for both
of those properties.
Caesars and its affiliated companies will continue to manage
Planet Hollywood and Horseshoe Baltimore, allowing these properties to
be part of the Total Rewards network and benefit from Caesars' shared
services operating model. Caesars and Growth Partners will have the
opportunity to work together to develop future projects. Caesars Entertainment's
management and development teams will continue to identify and advance
new growth opportunities. Caesars will then have the option to pursue
these projects itself or decline the project for itself, after which
Growth Partners may elect or decline to pursue the project.
The relative ownership percentages of each of CAC and Caesars
in Growth Partners will be determined by the amount of cash
proceeds received by CAC, and contributed to Growth Partners,
upon the sale of its shares to holders of the subscription rights.
Caesars is expected to own at least 57% of Growth Partners' economic
interests at closing, and as much as 77%, depending on the amount of
proceeds raised by CAC through its sale of shares, and will receive a
call option that allows it to repurchase all of the economic interest
and control of the assets in the future, subject to certain
limitations. The voting units and non-voting units of Growth
Partners will participate ratably in distributions and will be
identical economically, other than for certain call and liquidation
rights.
The values of the assets to be contributed or sold were
evaluated on Caesars' behalf by a valuation committee comprised of
three of Caesars' independent directors. The valuation committee
received financial advice from Evercore Partners and legal advice from Morrison & Foerster LLP.
Mitch
Garber, CEO of Caesars Interactive Entertainment,
Inc., will serve as CEO of CAC and continue in his role as CEO of
CIE.
The closing of the transactions will be subject to certain
conditions, including entry into definitive documentation, the receipt
of required approvals from applicable gaming and other regulatory
authorities and the receipt of certain bring-down opinions, and there
can be no assurance that such conditions will be satisfied.
A registration statement under the Securities Act of 1933
relating to the common shares of CAC has not yet been filed with the Securities
and Exchange Commission. The subscription rights and CAC shares
may not be sold nor may offers to buy the subscription rights and CAC
shares be accepted prior to the time a registration statement relating
to such rights and shares is filed and becomes effective. This press
release shall not constitute an offer to sell or the solicitation of an
offer to buy any security and shall not constitute an offer,
solicitation or sale in any jurisdiction in which such offering,
solicitation or sale would be unlawful.
About Caesars
Caesars
Entertainment is the world's most diversified
casino-entertainment company. Since its beginning in Reno,
Nevada, more than 75 years ago, Caesars has grown
through development of new resorts, expansions, and acquisitions, and
now operates casinos on four continents. The company's resorts operate
primarily under the Caesars®, Harrah's®, and Horseshoe®
brand names. Caesars also owns the World Series of Poker® and the London Clubs International
family of casinos. Caesars
Entertainment is focused on building loyalty and value with its
guests through a unique combination of great service, excellent
products, unsurpassed distribution, operational excellence, and
technology leadership. Caesars
Entertainment is committed to environmental sustainability and
energy conservation and recognizes the importance of being a
responsible steward of the environment. For more information, please
visit www.caesars.com.
This release contains or may contain "forward-looking
statements" intended to qualify for the safe harbor from liability
established by the Private Securities Litigation Reform Act of 1995.
These statements can be identified by the fact that they do not relate
strictly to historical or current facts. The Company has based these
forward-looking statements on its current expectations about future
events. Further, statements that include words such as "may," "will,"
"project," "might," "expect," "believe," "anticipate," "intend,"
"could," "would," "estimate," "continue," or "pursue," or the negative
of these words or other words or expressions of similar meaning may
identify forward-looking statements. These forward-looking statements
are found at various places throughout this release. These
forward-looking statements, including, without limitation, those
relating to future actions, new projects, strategies, future
performance, the outcome of contingencies such as legal proceedings,
and future financial results, wherever they occur in this release, are
necessarily estimates reflecting the best judgment of the Company's
management and involve a number of risks and uncertainties that could
cause actual results to differ materially from those suggested by the
forward-looking statements. These forward-looking statements should,
therefore, be considered in light of various important factors set
forth above and from time to time in the Company's filings with the Securities
and Exchange Commission.
In addition to the risk factors set forth above, important
factors that could cause actual results to differ materially from
estimates or projections contained in the forward-looking statements
include without limitation:
- the ability to satisfy the conditions to the closing of the
strategic transaction, including receipt of required regulatory
approvals;
- the strategic transaction may not consummate on the terms
contemplated or at all;
- the impact of the Company's substantial indebtedness;
- the effects of local and national economic, credit, and
capital market conditions on the economy, in general, and on the gaming
industry, in particular;
- access to available and reasonable financing on a timely
basis;
- the ability of the Company's customer-tracking, customer
loyalty, and yield-management programs to continue to increase customer
loyalty and same-store or hotel sales;
- changes in laws, including increased tax rates, smoking
bans, regulations or accounting standards, third-party relations and
approvals, and decisions, disciplines, and fines of courts, regulators,
and governmental bodies;
- the ability to recoup costs of capital investments through
higher revenues;
- the ability to timely and cost-effectively integrate
companies that the Company acquires into its operations;
- the effects of competition, including locations of
competitors, competition for new licenses and operating and market
competition;
- the potential difficulties in employee retention and
recruitment as a result of the Company's substantial indebtedness or
any other factor;
- construction factors, including delays, increased costs of
labor and materials, availability of labor and materials, zoning
issues, environmental restrictions, soil and water conditions, weather
and other hazards, site access matters, and building permit issues;
- litigation outcomes and judicial and governmental body
actions, including gaming legislative action, referenda, regulatory
disciplinary actions, and fines and taxation;
- the effects of environmental and structural building
conditions relating to the Company's properties or development
projects;
- acts of war or terrorist incidents, severe weather
conditions, uprisings, or natural disasters;
- losses sustained as a result of natural disasters,
including losses in revenues and damage to property, and the impact of
severe weather conditions on the Company's ability to attract customers
to certain of its facilities, such as the amount of losses and
disruption to the Company as a result of Hurricane Sandy in late October 2012; and
- the impact, if any, of unfunded pension benefits under
multi-employer pension plans.
You are cautioned to not place undue reliance on these
forward-looking statements, which speak only as of the date of this
release. The Company undertakes no obligation to publicly update or
release any revisions to these forward-looking statements to reflect
events or circumstances after the date of this release or to reflect
the occurrence of unanticipated events, except as required by law.
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