Caesars Entertainment Corp.’s new CEO Tony Rodio will be tasked with cutting costs and developing a new corporate strategy to help lift the company’s valuation, analysts say.
That, of course, assumes the Caesars board doesn’t soon choose to sell itself to a competitor.
The Las Vegas-based resort operator announced Tuesday that Rodio, a veteran gaming executive, will take the helm of the troubled company, ending a nearly six-month search for a successor. It also said the board has formed a committee to study a sale.
Rodio replaces Mark Frissora, who announced in November he would step down after four years on the job. Rodio will also take Frissora’s board seat.
“The new CEO will need to recreate the strategic direction of the company,” said John DeCree, an analyst at Union Gaming.
During Frissora’s reign, Caesars upgraded its properties on the Strip, launched construction of a new convention center, acquired two casinos in Indiana for $1.7 billion and expanded into non-gaming resorts overseas, including Dubai and Mexico.
Now Rodio may seek to shed some properties to cut debt.
Caesars executives told Macquarie Research last month that they would consider selling an asset to deleverage, the bank said in a note on Tuesday. Deutsche Bank forecasts Caesars net debt will stand at $7 billion at the end of 2019.
Rodio could also trim corporate expenses, said David Katz, a gaming analyst at Jefferies.
“Reducing the company’s leverage should be a priority” while Caesars’ corporate expenses — which total in the hundreds of millions of dollars — “presents an opportunity for the new CEO” to slash, he said.
Rodio will also need to focus on establishing a “positive culture,” Katz said. Caesars’ corporate culture has been hurt over the years by the bankruptcy and change in leadership, he said.
Big tasks for Rodio
Frissora joined Caesars in 2015 from Hertz and helped steer the gaming company through a two-year bankruptcy fight. He, too, cut costs and improved profitability, but lacked a gaming industry background.
Rodio is not new to Caesars, having previously served in a variety of roles at Harrah’s during his nearly 40-year gaming career. Rodio has spent much of his gaming career in Atlantic City, where Caesars owns three properties.
However, the 60-year-old lacks the experience of running such a large and geographically diverse company like Caesars, said Barry Jonas, a gaming analyst at SunTrust Robinson Humphrey.
Caesars operates more than 50 properties around the U.S. and overseas.
Close to Icahn
Caesars had until Monday to name a new leader or give an additional board seat to its largest shareholder, Carl Icahn.
The billionaire activist investor, who owns an 18 percent stake in Caesars, already controls three of its 12 board seats. Rodio’s appointment — at Icahn’s behest — only solidifies the investor’s control over the company.
Rodio has close ties to the 83-year-old Icahn, having run his casino operator Tropicana Entertainment for seven years until it was sold to Eldorado Resorts and Gaming and Leisure Properties in 2018 for $1.85 billion.
“It makes sense that Carl Icahn would pick someone he is comfortable with,” said DeCree.
The veteran executive joined Tropicana Entertainment as CEO shortly after it emerged from bankruptcy. He boosted the company’s net revenue during his tenure more than 50 percent through improvements and acquisitions.
Affinity Gaming, which owns 11 casinos, including five in Las Vegas, hired Rodio as CEO in mid October, just weeks after the Eldorado deal closed. Rodio will transition to his new role over the next 30 days, Caesars said in Tuesday’s statement.
He could not be reached Tuesday at Affinity Gaming.
Sale or no sale?
In February Icahn called on the Caesars board to study a sale as a way to boost shareholder value.
Though the board has formed a Transaction Committee composed of independent directors — including members who Icahn nominated — to study inquiries from other industry players, it will also consider “continuing to operate as an independent public company,” Caesars said in its statement Tuesday.
Caesars received a reverse-merger proposal last year from Tilman Fertitta, the billionaire owner of the Golden Nugget chain. Eldorado Resorts has also held informal talks with Caesars, according to various media. Eldorado and Caesars have declined to comment on that speculation.
Rodio offers the Caesars board “flexibility” because he has experience both growing a major gaming company as well as selling one, JPMorgan wrote in a note Monday.
Wall Street analysts have said that a deal with either company would be difficult to complete due to Caesars’ large size and debt burden.
“There can be no assurance that the exploration with other industry participants will result in any transaction or other result. The (Transaction) Committee has not set a timetable for completion of its review,” Caesars said in the statement.
Shares of Caesars rose Tuesday 14 cents, or 1.5 percent, to $9.52, outperforming major indices.