Nevada regulators OK Icahn’s 17.55% stake in Caesars Entertainment

Howard Stutz has over 30 years of experience reporting on the gaming industry.

The Nevada Gaming Control Board waived the appearance of Carl Icahn Wednesday in Carson City when regulators took up the corporate raider’s suitability to cover his 17.55% ownership stake in Caesars Entertainment.

With his top two lieutenants testifying by video hook-up from the board’s Las Vegas hearing room, it quickly became clear the 83-year-old Icahn’s presence wasn’t necessary.

“How often do you talk with Mr. Icahn?” Control Board Chairwoman Sandra Douglass Morgan asked Icahn Enterprises CEO Keith Cozza.

“Hourly,” he responded.

Cozza and Icahn Capital fund manager Courtney Mather spent roughly 20 minutes discussing Icahn’s decision to acquire his ownership stake in Caesars, which started at the end of 2018 through a series of stock sales and swaps.

The transactions culminated in the $17.3 billion sale of Caesars Entertainment to Reno-based Eldorado Resorts. When the deal is completed, the combined companies will create a regional gaming giant which currently controls 60 gaming properties in 18 states, including nine in Las Vegas and four of the nine resorts in Atlantic City. Eldorado executives, who will preside over the new company, have already said that casinos in several markets will be sold to avoid any antitrust concerns.

What won’t change is Icahn’s influence. Douglass Morgan pointed out that the activist investor would remain as the largest shareholder in the combined operation. Cozza said there are no immediate plans for Icahn to make an additional gaming industry investment.

Cozza told the Control Board that Icahn had expressed interest in Caesars after the company completed a two-year-long bankruptcy reorganization that allowed it to shed some $16 billion in debt when it emerged from the process in October 2017.

“He thought it would be a good investment,” Cozza said.

After spending more than $1.023 billion to acquire his stake in the casino giant, Icahn began pushing for a sale or merger of the casino giant.

Last March, Cozza, Mather and Icahn Enterprises board member James Nelson were added to the Caesars board. The sale to Eldorado took place three months later.

Icahn said in a June 24 statement the merger was a “quintessential example of how an activist shareholder, working collaboratively with the Board, can greatly enhance value for all stockholders.” Icahn said the sale reflected a 51 percent premium over Caesars’ March stock price.

Cozza, Nelson and Mather will be part of the new combined companies’ board once the deal closes, along with current Caesars directors Jan Jones Blackhurst and Don Kornstein.

Eldorado is providing six of its current board members to the combined company: Chairman Gary Carano, CEO Thomas Reeg – who will be CEO of the combined company – David Tomick, Frank Fahrenkopf Jr., Michael Pegram and Bonnie Biumi.

Mather said he’s worked for six years with Icahn and said the businessman “has a unique understanding of the gaming industry.” Prior to his stake in Caesars, Icahn owned the two Arizona Charlie’s casinos in Las Vegas, the Aquarius in Laughlin, Nevada, and the Stratosphere in downtown Las Vegas. He sold the four properties to a unit of Goldman Sachs for $1.3 billion in 2007.

Icahn also owned the seven-property Tropicana Entertainment, which was sold to Eldorado in 2018 for $1.8 billion. He also acquired the shuttered Fontainebleau project on the Las Vegas Strip out of bankruptcy in 2010 for $148 million. He sold the development in 2017 for $600 million to an investor group led by New York-based developer Steven Witkoff.

“We spent seven years looking at opportunities,” Cozza said. “Somebody wanted to sell us a building they put $2.2 billion into for $148 million. That’s the kind of deal we like. Along came a group of buyers. Carl negotiated a price with them we thought that was fair. We sold it and made a nice profit. We’re not developers. That’s not our core expertise.”

Cozza has worked for Icahn for 15 years.

The Control Board recommended a finding of suitability for Icahn, Cozza and Mather. The matter will be taken up by the Nevada Gaming Commission later this month.