New York hedge fund HG Vora Capital Management LLC has quietly built a 4.9% stake in Las Vegas casino and hospitality giant Caesars Entertainment Corp. and is pressing for the company to consider divestment of assets or an outright sale, Reuters reported on Wednesday citing unnamed sources familiar with the matter.
HG Vora was founded in 2009 and has since accumulated assets worth about $4 billion. According to sources, the hedge fund has achieved a 14% annualized return since being established.
This is not the first time that HG Vora has invested in a gaming or a hospitality company. The firm bought shares in Penn National Gaming and Pinnacle Entertainment ahead of their merger last year. In addition, earlier this year, HG Vora backed the sale of LaSalle Hotel Properties to Pebblebrook Hotel Trust. The New York hedge fund was the hotel chain’s third-largest stakeholder at the time.
Caesars emerged from a lengthy and complex Chapter 11 bankruptcy last fall and has been trying to catch up with its major rivals MGM Resorts International and Wynn Resorts, among others, as it is gradually paying down its debt and looking to improve its profitability.
The company said last year that its post-bankruptcy growth strategy would involve diversification and expansion across different markets. Caesars, like its rivals, has been investing in sports betting and is planning to focus further on the provision of that type of activity as more and more states are looking to legalize wagering, following mid-May’s lifting of the federal PASPA ban that prohibited betting on professional and college sports leagues.
Expansion and Consolidation
The legalization of gambling in several states where it used to be prohibited started a wave of consolidation within the US casino industry, and sports betting is expected to further shake it up. Similarly to its competitors, Caesars has been looking to gain foothold in as many states as possible in a bid to improve profitability and offset revenue declines caused by the fact that its main customer group is aging.
Last winter, the company announced that it would purchase privately owned gaming and horse racing company Centaur Holdings for the total amount of $1.7 billion. The move allowed Caesars to expand its Indiana operations. As pointed out earlier, HG Vora might be pressing for the company to engage in further consolidation deals or to divest itself from some of its existing assets.
Caesars currently operates nearly 50 properties across the US, United Kingdom, Canada, and Africa, among others. Its market capitalization stands at $7.2 billion and its total debt amounts to around $9 billion.
The company is exploring several new markets to expand its footprint into, including Japan where the local government is set to issue three gaming licenses that would authorize the operation of casinos within larger integrated resorts.
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