Caesars Stock Flirts with Buyout Price; Rival Bid Seen as Unlikely By Analysts

• Caesars stock continues to edge closer to the $31.00 per share cash buyout offer presented by Fertitta Entertainment
• Under the terms of the definitive agreement, Caesars’ contractually mandated “go-shop” window is set to expire on July 11
• While Wall Street analysts refuse to completely rule out a rival counter-bid emerging during this window, the consensus remains that a competing offer is highly improbable

On heavy volume, Caesars Entertainment (NASDAQ: CZR) stock is flirting with the all-important $31.00 level today, an indication that Wall Street has largely priced in the pending Fertitta takeover offer. However, analysts refuse to entirely rule out a late counter-bid emerging before the contract’s “go-shop” window closes, even if the odds remain incredibly long.

In midday trading, shares of the Harrah’s operator are trading around $30.60 on volume that’s already more than 30% above the daily average after touching $30.82 earlier in the session.

The $31 mark is pivotal because that’s the per share valuation of the casino giant in Tilman Fertitta’s $17.6 billion proposed takeover bid — an offer some analysts believe is too low.

Caesars’ flirtation with $31 is also important because a 45-day “go-shop” window in which the company can solicit higher acquisition bids closes on July 11. One analyst says it’s possible another offer emerges, but it’s probably not a bet worth taking.

While we do not rule out a competing offer, particularly given tour view that CZR’s intrinsic value exceeds Fertitta Entertainment’s current proposal, we believe stock upside is likely limited from current levels,” notes David Bain of Texas Capital.

Recently, some Caesars directors pared their stakes in the stock, potentially signaling they don’t expect Fertitta’s $31 per share offer to be exceeded.

Hard to Beat

When acquisition-related rumors pertaining to Caesars surfaced earlier this year, there was speculation indicating a broad field of prospective bidders was involved.

“While we are not privy to any Board level discussions related to the existing potential transaction, we note that the current proposal has already obtained committed financing from approximately one dozen of presumably the largest banks, limiting the pool of resources in a potential approximately $17.6B+ alternative transaction with other speculated parties,” adds Bain.

That said, it’s not unheard of for banks to loan money to competing bidders in a takeover scenario. It’s known as “stapled” financing and ensures banks get their piece of the financing pie regardless of what party wins the target.

Disappointing Takeover Bids in Casino Land

Some analysts argue that Caesars is worth $35 a share, implying that Fertitta’s offer is disappointing. That lack of fulfillment spread to other corners of the industry.

It was speculated that the Fertitta offer for Caesars implied MGM Resorts International (NYSE: MGM) is worth $55 to $60 a share, but Barry Diller’s People Inc. (NASDAQ: PPLI) is offering $48.30 a share for the Bellagio operator.

MGM hasn’t formally accepted or rejected that proposal, but the consensus on Wall Street is that it is not adequate and undervalues the company.