The proposed acquisition of Caesars Entertainment Corporation by Eldorado Resorts, Inc. and Colt Merger Sub, Inc. is the subject of a proposed class action lawsuit wherein a Caesars stockholder claims material information was omitted from a registration statement submitted in connection with the transaction.
Filed in Delaware District Court, the case states that the agreement and plan of merger effectuated in June 2019 by Caesars’ board of directors stipulated that Caesars stockholders would receive $8.40 in cash and 0.0899 shares of parent stock for each share they owned of the casino and resort operator’s common stock. Included in the merger agreement was a “no solicitation” provision the lawsuit says prohibited the individual defendants, i.e. the Caesars board of directors, from soliciting alternative proposals and constrained their ability to negotiate with potential buyers. The merger terms also stated Caesars must promptly inform Eldorado of any acquisition proposals received from other parties, the case says.
According to the complaint, the registration statement submitted to the Securities and Exchange Commission (SEC) in connection with Caesars’ acquisition by Eldorado Resorts was missing material information with regard to both parties’ financial projections. Specifically, the suit charges the defendants failed to disclose for each set of Caesars and Eldorado’s financial projections all line items used to calculate earnings before interest, taxes, depreciation, amortization, and restricting or rent costs (EBITDAR); earnings before interest, tax, depreciation and amortization (EBITDA); and unlevered free cash flow.
“The disclosure of projected financial information is material because it provides stockholders with a basis to project the future financial performance of a company, and allows stockholders to better understand the financial analyses performed by the company’s financial advisor in support of its fairness opinion,” the complaint reads.
Further, the case claims material details on the analyses performed by Caesars’ financial advisor PJT Partners was also missing from the defendants’ SEC registration statement. The lawsuit similarly alleges potential conflicts of interest with PJT were left out of the registration statement, as was the disclosure of fees paid to the company.
The plaintiff argues that the information omitted from the registration statement, if disclosed, “would significantly alter the total mix of information available” to Caesars stockholders.