Backed by $500 million in equal funding from private equity firms Apollo Global Management (APO) and TPG Capital, Caesars will form what it called a “new growth-oriented entity,” called Caesars Growth Partners, a separate company from Caesars Entertainment.
Caesars Entertainment shares were up 26% in Tuesday afternoon trading after retreating from morning highs that saw shares up as much as 37% on the stock market today.
The heavily indebted casino operator will sell shares in Caesars Growth Partners but retain majority ownership, estimated at 57% to 77%, depending on the amount raised by sale of shares.
Caesars Growth Partners will take over the company’s online gaming business, called Caesars Interactive Entertainment, and buy the Planet Hollywood Resort & Casino in Las Vegas from a Caesars subsidiary.
It will also purchase the part of a joint venture it doesn’t own in the Horseshoe Baltimore resort casino in Baltimore.
Although Caesars didn’t mention overseas investment, it could also be eyeing investment in Macau, the world’s largest and fastest growing casino gambling destination.
Las Vegas Sands (LVS), the world’s biggest casino company, MGM Resort International (MGM) and Wynn Resorts (WYNN) all have facilities there and rely on Macau, Singapore and other hot overseas locales as their primary growth driver.
Sands last year opened the Sands Cotai, a multibillion dollar expansion at its Macau site.
Caesars CEO Gary Loveman said creation of the new company is a major step in the company’s ongoing effort to improve its balance sheet.
“The transaction enables us to raise equity capital at attractive valuations without diluting stockholders of Caesars and provides Caesars additional cash liquidity without incurring new debt,” Loveman said in a press statement.
After going public in February 2012 at 9 a share, Caesars shares lost half their value and were trading at 4.52 before they turned up on Nov. 16 in sync with a market upturn. The company has lost money every quarter since going public.
The casino company got a boost earlier this year after New Jersey became one of the first states to legalize online gambling within its borders. Caesars is one of the top Atlantic City casino operators, giving it a leg up in the budding Internet gaming market there.
Among other large casino companies, Sands rose 0.8%, MGM advanced 1.5% Tuesday afternoon and Wynn was up 0.4%.
Hong Kong-based Melco Crown Entertainment (MPEL), a casino company that competes with U.S. casinos in Macau, rose 0.4%.