Caesars CEO Reeg Says No Involvement with Penn, Eyes Buybacks
Caesars CEO Reeg Says No Involvement with Penn, Eyes Buybacks
Caesars Entertainment (NASDAQ: CZR) CEO Tom Reeg recently made it clear that his company is not involved in the takeover chatter surrounding its rival, Penn Entertainment (NASDAQ: PENN). During the company’s latest earnings conference, he expressed confidence in Caesars’ future direction.
In response to a question from a Wells Fargo analyst, Reeg stated, “We aren’t interested in Penn Entertainment and won’t use our depressed stock to fund acquisitions.” His statements reflect a firm stance against potential mergers.
“I’m not an issuer of stock at $36, wherever it was today. We are on the path to significant cash flow as our project spending decreases,” said Reeg.
Despite Caesars shares seeing an increase of 13% recently, the stock is down 30% year-over-year, making it one of the poorer performers in the gaming sector.
Reeg Not Going to Give Away Caesars Stock
Rumours of a potential acquisition of Penn gained traction late last year following suggestions from an investor that they should consider a sale. Recently, Boyd Gaming (NYSE: BYD) has been speculated as a potential buyer for Penn, though no official commentary has been provided by either party.
Given Caesars’ current exposure in various markets already catering to Penn’s operations, Reeg solidly maintains that the company is not exploring any involvement in likely bidding wars. He firmly stated, “I’m not going to throw our stock away.” Instead, the focus is on returning capital to shareholders as their capital spending on new projects winds down.
Reeg indicated plans for buybacks, stating, “You can expect us to begin repurchasing stock. If the stock transitions to different valuation levels, we can re-evaluate.”
As competition heats up among casino operators, many have recently ramped up dividends and share repurchase programs. In contrast, Caesars has not initiated either while actively working to alleviate one of the industry’s most burdensome debt loads, and simultaneously working on new casino openings in Nebraska and Virginia.
Potential Factors That Could Boost Caesars
Caesars’ ability to reward its shareholders in the future may hinge on reductions in capital expenditures and better interest rates, potentially on the horizon.
Noted analyst David Bain from B. Riley remarked, “A significant portion of CZR’s capital expenditures will decline this year, allowing Digital earnings before interest, tax, depreciation, and amortization (EBITDA) to rise. This aligns with the potential sales of non-core assets like the Promenade, leading to improved share valuations.” He provided insight on how $60 million in interest savings could emerge for every 100 basis points decline in rates.
Reeg has also hinted at the willingness to dispose of certain non-essential casinos, reiterating this point during the call.
Conclusion
Ultimately, Caesars is adopting a cautious approach, focusing on internal growth through enhanced cash flow and prudent capital management rather than pursuing risky acquisitions. The strategic emphasis on capital return signals confidence in the company’s long-term prospects in the competitive gaming landscape.
