What is Carl Icahn’s plan?
The fascination with this subject is rising as the billionaire shows no sign of backing away from his ever-tightening grip on Caesars Entertainment.
He wants to get his hands on the value he sees there and probably repackage and sell brands such as Harrah’s, Horseshoe and Caesars Palace. All of them operate under the Caesars corporate flag.
The possibilities for expanded sports betting have spurred some of the fascination. But what Icahn is doing is creating a buying opportunity that hasn’t been seen since Howard Hughes turned his attention to Las Vegas in the 1960s.
What Icahn has said in so many words is that he wants the company to sell some of its dozens of properties and other holdings such as the World Series of Poker, maybe even a lot of its casinos and hotels as it also looks to a sprawling green field of opportunities elsewhere.
“Carl knows how to create value and that is guaranteed to attract attention in the casino business,” said Kevin DeSanctis, who has previously managed casinos for high-rollers such as Donald Trump and Steve Wynn. “I have a lot respect for what he (Icahn) did at the Tropicana (in Atlantic City).”
The Tropicana was sold to the previously tiny Reno-based Eldorado Resorts, which just happens to be one of the casino operators looking for additional growth opportunities. Others include MGM, Boyd, Penn and well ... everyone is paying attention.
But the question is what’s Icahn going to do, considering he owned nearly 18 percent of Caesars as of a week ago and it could be more than that now. He has pressured Caesars into adding three new board members who can be counted on to pay attention to whatever Icahn wants. A fourth person may be added to the 12-member body in April
What Icahn wants is for the the Caesars Board to sell some of it roughly 50 casinos. Caesars operates major properties at the corner of the Strip and Flamingo Road, a very busy intersection.
That’s like the cherry on top of the sundae. Because the holdings of this Las Vegas-based company stretch a long way from Flamingo and the Strip.
Then there is the value of the name. The imaginative thinkers charting strategy years ago spotted Caesars as a label that could apply to a wide variety of products aimed at the high-end market.
Former board chairman Henry Gluck saw Caesars as a marketing vehicle for a products that might be marketed to anyone enjoying a high level of spending power. I remember the evening when they went public for first time with a Caesars perfume.
The success of the Forum Shops at Caesars has since inspired others to step into the retail business.
That’s one of the reasons Gluck was content to maintain Caesars as a “niche” hotel of some 1,400 rooms at a time when hotels in the Caesars Palace neighborhood were growing to 4,000 or more rooms. Never mind that it might occasionally be difficult to get a room at Caesars.
Price was no problem for the best Caesars customers who were quite happy to pay the price or risk enough in the casino to earn a comp.
A succession of owners has been responsible for a revision in the “niche hotel” philosophy. Caesars Palace now has more than 4,000 rooms. But there was a huge leap forward in terms of reach when the Caesars image was merged with Harrah’s marketing muscle.
An executive who formally competed against Harrah’s remembed: “A lot of people don’t realize how powerful Total Rewards could be. When my company bought a former Harrah’s company and they pulled the plug (on Total Rewards) it took me a year to get back the revenue that the absence of that program cost us.”
Total Rewards has since been renamed Caesars Rewards. The more than 50 million names in the program would be a nice addition to any company’s loyalty program.
DeSanctis considered the big picture and said, “Any combination of the various elements could be worth more than the whole company is now.”
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