Caesars Entertainment to Save $40M Annually by Reducing Corporate Positions
Posted on: March 15, 2019, 08:06h.
Last updated on: March 15, 2019, 08:06h.
Caesars Entertainment has announced plans to trim its corporate costs by $40 million a year, as the future of the casino giant remains in limbo and billionaire corporate raider Carl Icahn continues to increase his position in the company.
The $40 million savings plan will come by way of reducing “corporate overhead,” the company said in a statement yesterday. Caesars will cut a “small percentage” of corporate jobs, and also eliminate open positions. Consulting services will also be reduced.
The corporate overhaul was expected, as Caesars Entertainment CFO Eric Hession told investors during the company’s Q4 call, “We’re focused on reducing corporate costs. They are currently elevated due to our IT transformation and sports betting businesses, and we expect to show improvement later in the year from the current run rate.”
CEO Mark Frissora added, “Looking ahead, Caesars will implement more efficiency.”
Caesars officially emerged from Chapter 11 bankruptcy in October 2017. Bloomberg analysts said recently that the company’s reorganization left the casino operator with “distressed debt investors and hedge funds.” Today, those shareholders and entities have much influence over the Las Vegas gaming and hospitality group.
Private Equity Cashes Out
Apollo Global Management and TPG Capital – two of Caesars Entertainment’s largest shareholders over the last decade – officially departed the company this week after a tumultuous 11-year position.
Combined, the two private equity firms unloaded 38 million Caesars shares, per a filing with the US Securities and Exchange Commission (SEC). The total disbursement was $323 million, or 5.7 percent of the company.
The two firms acquired Caesars – then known as Harrah’s Entertainment – in January 2008 for $27.4 billion. At that time, shares of the casino operator were trading above $80. That same year, however, Lehman Brothers filed for Chapter 11 bankruptcy and ignited the worst US recession since the 1930s.
Today, those $80 Caesars shares are trading below $9.
Las Vegas Savings
Caesars’ announcement to cut costs to save $40 million follows MGM Resorts’ “2020 Plan” to save $100 million a year. MGM said in January it would reduce three percent of its workforce – or around 2,100 jobs – with the goal of increasing adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by $300 million by the end of 2021.
Icahn now controls nearly 18 percent of Caesars Entertainment. The billionaire activist investor has been pressuring the company to sell. Golden Nugget and Eldorado Resorts have both expressed interest, but were rejected by the Caesars board.
That board has since changed, as Icahn has been afforded three seats. Along with better exploring potential reverse acquisitions, he’s using the presence to sell Affinity Gaming CEO Anthony Rodio as the best candidate to replace Frissora.
Frissora announced his resignation amid investor pressure in February. He’s staying with the company until his successor is identified. According to SEC filings, Caesars will pay Frissora an “equity grant” totaling $7 million for agreeing to stay through the end of April.
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Last Comments ( 2 )
These corporate people have destroyed the Harrah's brand and basically killed it. They have milked millions upon millions in salary, benefits and other perks all the while the stock holders are not getting anything from their investment. This is a horribly run corporate operation most likely with little to no gaming knowledge whatsoever. I cant stand them. Its just my opinion.
The picture in the article show a bunch of do nothing muckie muckies making millions. If they actually hired people based on their gaming experience instead of their education, they would make even more money. In my opinion, the Caesars Brand has been destroyed.