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Carl Icahn poised for significant Caesars board influence

Updated February 20, 2019 - 5:39 pm

Caesars Entertainment Corp. may not be able to stop Carl Icahn from grabbing significant board influence as the casino operator transitions to new corporate governance rules.

Icahn owns nearly 10 percent of the company, according to Securities and Exchange Commission filings published Tuesday. In SEC documents, Icahn said he was seeking board representation and encouraged the company to be sold.

Caesars is shifting from staggered, three-year terms for board directors to one-year and will have seven of 12 seats up for re-election at the 2019 annual shareholders meeting. All 12 seats will be up for re-election in 2020, improving Icahn’s chances of getting multiple representation.

The casino operator permits cumulative voting, which allows shareholders to cast all of their votes for a single nominee, increasing the chances of minority shareholders to elect a director.

“A cumulative voting structure will make it much easier for Icahn to get his representatives on the board,” said Ben Edwards, a UNLV law professor focusing on corporate governance.

Icahn has until March 1 to submit candidates for this year’s election, which will likely be held in late spring.

Significant board representation would enable the billionaire investor to influence key decisions, including the sale of the company as well as the choice of a new CEO.

Icahn’s chances of gaining seats would grow as he is able to recruit more shareholders.

“The more (hedge) funds he draws to his cause will increase his reach. With the large blockholders in the stock, it would not be surprising if he picked up a couple seats,” Edwards said.

Los Angeles-based Canyon Capital owned 10.4 percent of Caesars as of Dec. 31. Icahn and Canyon last year resisted Dell’s effort to buy back of shares tied to its interest in VMware Inc. for $21.7 billion. Canyon did not respond to a request for comment about its support for Icahn.

Second battle with Frissora

Icahn said Tuesday that Caesars should not extend CEO Mark Frissora’s contract or hire a new executive until he has had time to speak with the board.

Frissora announced in November he would step down when his contract expired in February, but the company extended his tenure until April as it continues to seek a successor. Caesars said Wednesday it has been holding talks with Icahn.

Icahn took aim at Frissora in SEC documents, saying Caesars “requires new thought, new leadership and new strategies.’’

Caesars responded to the billionaire hedge fund activist Wednesday, saying it will “evaluate” his suggestions and defending Frissora’s leadership.

Caesars has cut costs, boosted margins and slashed annual interest payments by $300 million during Frissora’s tenure, the company said.

“Caesars has continued to expand margins by driving record labor and marketing efficiency levels, while also achieving all-time high customer and employee satisfaction,” the company said in a statement.

Caesars is forecast to post property cash flow margins this year of 36 percent compared with 30 percent for its largest Strip rival, MGM Resorts International, according to JPMorgan Chase. Wall Street analysts have complimented Frissora for improving the company’s operating efficiency. Caesars said the increase in cash flow will enable it to cut is high debt load.

The company also said it has been pursuing new growth initiatives, including investing in gaming innovation and developing nongaming resorts. The company announced last month it would open its first nongaming property in the U.S. in Scottsdale, Arizona.

Frissora may address the situation in more detail Thursday when he hosts a conference call with analysts following publication of the company’s 2018 financial results.

Contact Todd Prince at 702-383-0386 or tprince@reviewjournal.com. Follow @toddprincetv on Twitter.

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