Shares of Caesars Entertainment Corp. surged as much as 15 percent Wednesday amid reports billionaire Tilman Fertitta has proposed merging his casino business with the Las Vegas-based gaming giant.
Caesars stock closed at $10.20, up $1.11, or 12 percent, from Tuesday’s close. More than 88 million shares changed hands during the day, six times the daily average of the past 50 trading sessions. Caesars declined to comment on the report. Fertitta’s Landry’s Inc. did not return multiple requests for comment.
Landry’s owns five Golden Nugget hotels and casinos, including one in downtown Las Vegas and another in Laughlin. The other three are located in Atlantic City, Biloxi, Mississippi, and Lake Charles, Louisiana.
Fertitta has proposed Caesars purchase his casino business with a combination of cash and shares that values the company at $13 a share, CNBC reported, citing unidentified people.
The network did not say how large a stake Fertitta would receive in Caesars if a deal was approved, but it said he would become chief executive officer and chairman of the enlarged company. CNBC did not say whether current Caesars CEO Mark Frissora would maintain his board position.
Fertitta’s casino business could be worth about $1.8 billion, including debt, analysts have said. At $13 a share, Caesars would be valued at $9 billion. Caesars also has net debt of $9 billion.
Wednesday’s rumor comes on the heels of reports that hedge funds are pushing for a shakeup at Caesars following a 20 percent decline in its share price since August.
The gaming company’s management has also been criticized for its $1.7 billion purchase of two Indiana casinos, a deal that was completed in July, analysts said.
Caesars now operates 49 casinos in 13 states and five countries. It is the largest gaming company by properties in the U.S. Caesars management has said it is seeking to acquire more gaming properties, but it is unclear if a deal with Fertitta would suit the company’s strategy.
Caesars already has properties in Atlantic City, Laughlin, Biloxi as well as Las Vegas, though not in downtown. It doesn’t have a presence in Lake Charles.
Credit Suisse said in a note Wednesday morning that the merger makes sense.
The “brands, casino and restaurant assets are very complementary,” said the bank’s gaming analyst Cameron McKnight. ”Fertitta would be a great addition to [Caesars] management team — he’s well known, liked, and renowned cost cutter.”
A deal would be the largest in the casino industry since Penn National Gaming acquired Pinnacle Entertainment in a $2.8 billion transaction. That deal was first announced in December and completed this week.
The casino industry has been experiencing an intense period of consolidation over the past three years as companies seek growth and cost savings. The acquisition bonanza has been fueled with cheap credit.