Caesars IPO... From Odd To Just Bizarre (CZR)

Caesars Entertainment Corporation is supposed to be one of the Top 17 IPOs to Watch in 2012.  That remains the case, but it is not because we have such admiration nor because of great success.  This is a huge company owned by private equity and it marks the resale of a huge leveraged buyout by private equity at the height of the private equity bubble.

A fresh filing is one that frankly shows desparation or the agony of defeat.  The combined outfits are worth billions of dollars.  While the total to be sold by Caesars Entertainment Corporation on a continuous basis is listed as being $500 million, the company noted, ” We are selling an aggregate of 1,811,313 shares in this offering. The initial public offering price of our common stock is expected to be between $8.00 and $10.00 per share.”

Wait one second here.  That is about $18.1 million in gross proceeds.  If you look back at the Top IPOs to watch you will be mystified.  The stock will trade on the Nasdaq Global Select Market under the symbol “CZR.”

Caesars has the following underwriters: Credit Suisse; Citigroup; BofA Merrill Lynch; Deutsche Bank Securities; KeyBanc Capital Markets; Lebenthal & Co.; and Ramirez & Co. The underwriters will have a 30-day option to purchase up to 271,697 additional shares from the company at the initial public offering price less underwriting discounts and commissions.

In the amended prospectus, the company does note that the selling shareholders may sell up to $223.4 million in common stock in the offering.  The problem is that the prospectus does not read in the normal way of other prospectus filings. The private equity firms are currently a wild card when it comes to how much may be sold.  Why the private equity owners have not broken Caesars up into bits and pieces is a mystery.  The Harrah’s acquisition is now part of the Caesars group and here is the description (as of September 30, 2011):

owned, operated or managed 52 casinos in 12 U.S. states and seven countries primarily under the Caesars, Harrah’s and Horseshoe brand names and the facilities had an aggregate of approximately three million square feet of gaming space and approximately 42,000 hotel rooms; its Total Rewards customer loyalty program had over 40 million members.

If the private equity companies were to somehow get the maximum sale off of $500 million, it could take a decade or more to exit. Maybe our idea is a silly one.  Maybe this is the private equity value game at work where the private equity firms can use the public market value of a small float for the entire organization without unloading it.  What are the odds?

FULL SEC FILING

JON C. OGG