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CZR > SEC Filings for CZR > Form 8-K on 23-Oct-2013All Recent SEC Filings

Show all filings for CAESARS ENTERTAINMENT CORP

Form 8-K for CAESARS ENTERTAINMENT CORP


23-Oct-2013

Entry into a Material Definitive Agreement, Completion of Acquisition


Item 1.01 Entry into Material Definitive Agreement.

Caesars Growth Partners Transaction

On October 21, 2013, Caesars Entertainment Corporation ("Caesars") distributed to its stockholders as of the record date (October 17, 2013) subscription rights to purchase common stock of Caesars Acquisition Company ("CAC") in connection with a rights offering (the "Offering"), as previously announced in Caesars' Current Reports filed on April 23, 2013, October 3, 2013 and October 18, 2013.

On October 21, 2013, (i) CAC, Caesars Growth Partners, LLC ("Growth Partners") and Caesars and its subsidiaries consummated the Contribution Transaction (as defined below), (ii) affiliates of Apollo Global Management, LLC ("Apollo") and affiliates of TPG Global, LLC ("TPG" and, together with Apollo, the "Sponsors") exercised their basic subscription rights in full to purchase $457.8 million worth of CAC's Class A common stock at a price of $8.64 per whole share and CAC used such proceeds to acquire all of the voting units of Growth Partners and
(iii) Growth Partners used the proceeds to consummate the Purchase Transaction (as defined below). In connection with the Purchase Transaction and the Contribution Transaction, CAC and Growth Partners entered into agreements with Caesars Entertainment Operating Company, Inc. ("CEOC") and its subsidiaries to provide certain corporate services and back-office support and business advisory services to CAC, Growth Partners and their subsidiaries as described below (such agreements collectively, together with the Purchase Transaction and Contribution Transaction, the "Transactions").

In connection with the consummation of the Transactions on October 21, 2013, Caesars contributed all of the shares of Caesars Interactive Entertainment, Inc.'s ("CIE") outstanding common stock held by a subsidiary of Caesars and approximately $1.1 billion in aggregate principal amount of senior notes (the "CEOC Notes") previously issued by CEOC that are owned by another subsidiary of Caesars in exchange for non-voting units of Growth Partners (collectively, the "Contribution Transaction", and these assets, the "Contributed Assets"). The Contributed Assets had an agreed aggregate value of approximately $1.304 billion after certain value-related adjustments for the CEOC Notes. This agreed valuation is subject to potential increase by up to $225.0 million based on earnings from CIE's social and mobile games business exceeding a specified amount in 2015, which would be conveyed to Caesars or its subsidiaries in the form of additional non-voting units of Growth Partners or Class B common stock of CAC. If prior to July 21, 2014, Growth Partners sells or agrees to sell all of its interests in CIE (or any of its component parts) to any third party other than Caesars, then Caesars will receive concurrent with the closing of such sale, that number of additional non-voting units of CAC that would have been issued to Caesars if the value of CIE (or any of its component parts) at the time of contribution to Growth Partners were increased by the difference between such third party sale price and the applicable valuation price of $525 million as it relates to CIE (or any of its component parts).

Additionally, on October 21, 2013, Growth Partners used $360.0 million of proceeds received from CAC to purchase from subsidiaries of Caesars (i) the Planet Hollywood Resort and Casino Located in Las Vegas, Nevada ("Planet Hollywood"), (ii) Caesars' joint venture interests in a casino to be developed by CBAC Gaming, LLC (the "Maryland Joint Venture") in Baltimore, Maryland (the "Horseshoe Baltimore") and (iii) a 50% interest in the management fee revenues for both of those properties(collectively, the "Purchase Transaction", and these assets, the "Purchased Assets"). A subsidiary of Growth Partners assumed the $513.2 million of the outstanding secured term loan related to Planet Hollywood (the "PHW Loan") in connection with the Purchase Transaction.

After the third anniversary of the closing of the Transactions, Caesars will have the right (the "Call Right"), which it may assign to any of its affiliates or to any transferee of all non-voting units of Growth Partners held by Caesars, to acquire all or a portion of the voting units of Growth Partners (or, at our option, shares of CAC's Class A common stock) not otherwise owned by Caesars and/or its subsidiaries at such time. On the eighth year and six month anniversary of the closing of the Transactions (unless otherwise agreed by Caesars and CAC), if the board of directors of CAC has not previously exercised its liquidation right, Growth Partners shall, and the board of directors of CAC shall cause Growth Partners to, effect a liquidation.

Upon consummation of the Transactions on October 21, 2013, Caesars, through its subsidiaries, owns approximately 79% of the economic interests of Growth Partners. In addition, the board of directors of Caesars received certain opinions from an independent, nationally recognized valuation firm about the respective values of the assets sold and contributed to Growth Partners, the equity interests and other consideration received in consideration for the contribution of certain of such assets, and the fairness from a financial point of view to Caesars of the total consideration received in consideration for the sale and contribution of such assets to Growth Partners.

Transaction Agreement

In connection with the Transactions, on October 21, 2013, CAC and Growth Partners entered into a Transaction Agreement with Caesars and certain of its subsidiaries that governs the distribution of the rights, the


contribution and purchase of certain assets by subsidiaries of Caesars and the ongoing rights and responsibilities among the parties. The Transaction Agreement provides for customary representations, warranties and indemnities and, among other things, provides for the:

distribution of the CAC subscription rights via dividend to the stockholders of record of Caesars;

contribution by CAC to Growth Partners of the proceeds in exchange for voting units of Growth Partners;

contribution by certain subsidiaries of Caesars of the Contributed Assets in exchange for non-voting units of Growth Partners (reflecting the closing date allocation true-up for the CEOC Notes), subject to certain closing conditions and adjustments for an earnout based on a component of CIE's earnings in 2015;

issuance of non-voting units of Growth Partners to a subsidiary of Caesars if, within nine months after the closing of the Transactions, Growth Partners sells or agrees to sell all of its interests in CIE (or any material component part) to any third party other than Caesars at a sale price greater than the valuation of CIE (or any such material component part) at the time of contribution to Growth Partners;

purchase of the Purchased Assets by Growth Partners for fair value, subject to certain closing conditions and adjustments;

option, at the election of the Sponsors, to proceed with a closing in multiple stages (deferred closings will not be applicable);

agreement to enter into the CGP Management Services Agreement (as described below); and

the aggregate fair-market value, if any, of the subscription rights distributed by Caesars to be restored to Caesars in the form of CEOC Notes.

CGP Operating Agreement

In connection with the Transactions, on October 21, 2013 certain subsidiaries of Caesars entered into an amended and restated limited liability company agreement of Growth Partners (the "CGP Operating Agreement"), under which CAC was issued 52,990,608 voting units and such subsidiaries of Caesars were issued 199,508,897 non-voting units. CAC will manage and operate the business and affairs of Growth Partners as the managing member and sole holder of its voting units, and may request certain back-office and advisory services from CEOC under the CGP Management Services Agreement. Approval by the CAC board of directors will be required to approve certain significant corporate actions at Growth Partners, including, among other things, liquidation or dissolution; merger, consolidation or sale of all or substantially all of the assets; acquisitions or investments outside of the ordinary course of business; and material amendments to the CGP Operating Agreement.

All of the holders of units will be entitled to share equally in any distributions that CAC, as managing member, may declare from legally available sources, subject to the distribution waterfall in connection with a liquidation, a partial liquidation or sale of material assets (as described below under "-Liquidation Right"). All of the holders of units will also be entitled to receive quarterly cash tax distributions (other than in connection with a liquidation or certain partial liquidations). The Call Right held by certain subsidiaries of Caesars, the liquidation right held by CAC and the development of ongoing business opportunities are further described below.

The management, operation and power of Growth Partners is vested exclusively in CAC and independent of Caesars; provided, however, that the CGP Operating . . .



Item 2.01 Completion of Acquisition or Disposition of Assets.

The information set forth under Item 1.01 above is incorporated by reference into this Item 2.01.

Item 5.01 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

On October 21, 2013, in connection with the consummation of the Transactions, Karl Peterson, who is currently a director of CAC, resigned as director of Caesars.



Item 9.01 Financial Statements and Exhibits

(d) Exhibits. The following exhibits are being filed herewith:

Exhibit
  No.                                     Description

10.1         Transaction Agreement, dated as of October 21, 2013, among Caesars
             Acquisition Company, Caesars Growth Partners, LLC, Caesars
             Entertainment Corporation, HIE Holdings, Inc., Harrah's BC, Inc., PHW
             Las Vegas, LLC, PHW Manager, LLC, Caesars Baltimore Acquisition
             Company, LLC and Caesars Baltimore Management Company, LLC.

10.2         Amended and Restated Limited Liability Company Agreement of Caesars
             Growth Partners, LLC, dated as of October 21, 2013.

10.3         Management Services Agreement, dated as of October 21, 2013, among
             Caesars Acquisition Company, Caesars Growth Partners, LLC and Caesars
             Entertainment Operating Company, Inc.

10.4         Registration Rights Agreement, dated as of October 21, 2013, among
             Caesars Acquisition Company, Caesars Growth Partners, LLC and certain
             subsidiaries of Caesars Entertainment Corporation.

10.5         Registration Rights Agreement, dated as of October 21, 2013, between
             Caesars Entertainment Corporation and Caesars Acquisition Company.

10.6         Omnibus Voting Agreement, dated as of October 21, 2013, among Apollo
             Hamlet Holdings, LLC, Apollo Hamlet Holdings B, LLC, TPG Hamlet
             Holdings, LLC, TPG Hamlet Holdings B, LLC, Co-Invest Hamlet Holdings,
             Series LLC, Co-Invest Hamlet Holdings B, LLC, Hamlet Holdings LLC,
             Caesars Entertainment Corporation and Caesars Acquisition Company.


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