Sosnoff Drops Caesars Bid Week After Court Setback
LOS ANGELES (AP) _ Investor Martin Sosnoff on Monday abandoned a 3 1/2 -month-old hostile bid for Caesars World Inc., saying he couldn’t justify further costs to himself or to Caesars’ shareholders of continuing the fight.
The decision came a week after a federal court halted Sosnoff’s $35 a share tender offer for 73.9 percent of the hotel-casino operator on the grounds that too much of his financing for the bid was being secured by Caesars’ stock.
The New York-based money manager said he was willing to raise his bid in a negotiated takeover if one could be worked out before shareholders voted July 8 on a $1.26 billion recapitalization plan proposed by management to thwart the takeover.
But Sosnoff said he wass ″satisfied that all shareholders will receive substantial value″ from Caesars’ recapitalization plan and expected it would be approved.
Caesars’ chairman, Henry Gluck, said he was ″pleased to be moving forward″ with the recapitalization plan. Spoksman Jack Leone declined to comment on whether Caesars intended to discuss a possible higher bid with Sosnoff.
Caesars operates hotel-casinos in Nevada and New Jersey and mountain resorts in Pennsylvania.
After Sosnoff’s announcement, Caesars’ common stock closed at $33.87 a share, down 37 1/2 cents, in New York Stock Exchange composite trading.
When Sosnoff on March 9 initially made a $28 a share offer for the company the stock was trading at about $24 a share. But Sosnoff said that after paying $30 million in expenses he incurred in the takeover battle he expected to show ″virtually no financial gain″ on an after-tax basis.
Sosnoff said he intended to retain his stake in Caesars and ″viilantly monitor Caesars’ conduct in pursuing its recapitalization plan.″
Sosnoff’s latest offer of $35 cash a share, or a total of $927.5 million, was for 26.5 million of the company’s 35.9 million common shares outstanding. That would have raised his stake in Caesars to 85.6 percent from 11.7 percent.
Sosnoff had pledged to offer a package of securities for the rest of the stock, but put no value on it. Analysts indicated it would be worth somewhat less than $35 per share.
Under the recapitalization plan it proposed to thwart the takeover, Caesars is offering a special one-time dividend of of $26.25 per share to all stockholders.
In addition, shareholders will retain their stock, which has been trading at $8.75 on a when-issued basis, giving the recapitalization package a total value of $35 per share.
In a lengthy statement, Sosnoff had bitter words for U.S. District Judge William Rea in Los Angeles and the New York Stock Exchange.
Last Monday, Rea ruled Sosnoff couldn’t continue with his tender offer because $975 million of the $1 billion Sosnoff was raising for the bid would, in effect, be secured by Caesars’ stock.
Federal Reserve Board regulations prohibit the borrowing of more than 50 percent of the purchase price of stock if that stock is to be pledged as security to a lender.
Rea included $475 million in ″exchangeable preferred stock″ offered by Sosnoff, saying it was likely those shares would be converted to common stock. Sosnoff said Monday he disagreed with the interpretation.
Rea said Sosnoff could revive his takeover bid, but only if he revamped the financing. Sosnoff abandoned his bid after huddling last week with financial advisers.
Sosnoff also indicated he was bitter about an NYSE decision to trade the ‘stub’ from Caesars’ recapitalization plan on a when-issued basis.
He insisted that action ″provides an opportunity for fraud on the marketplace and has misled investors looking for a reliable guide for comparing my tender offer to management’s recapitalization plan.″
He urged the Big Board to consider such decisions carefully in the future.