Caesars Entertainment is a massive corporation with multiple subsidiaries that control worldwide hotel and casino properties, a full-scale online gaming operation, the prestigious World Series of Poker brand and much more. The company hasn’t been faring well of late. With debt mounting and Chapter 11 in progress, there are fears the company may not survive. Rumors now indicate Caesars may be considering selling off one of its primary assets.
The subsidiary in question in Caesars Interactive Entertainment (CIE). This division controls all of the company’s social and online gaming operations, as well as the WSOP. Word around the water cooler is that Caesars is entertaining unsolicited bids of $4 billion for CIE.
Selling off the subsidiary might save them a lot of hassle with bankruptcy claims in the short term, but is it a smart move when the company’s interactive operations are one of the very few divisions that are actually turning a profit these days?
CIE Saves Caesars in Q1
Just last week, reports came pouring in that CIE had provided Caesars Entertainment with a substantial boost to its Q1 revenue. As of March 31, 2016, first quarter growth was up 13.6% year-over-year to $643.6 million. The biggest jump came from CIE, which rose nearly 29% to $227.8 million in the same period, thanks to the success of interactive products like WSOP.com and social gaming applications.
According to the Wall Street Journal, a deal for the company’s interactive division “could fetch more than $4 billion.”
WSJ said the initial reports surfaced Friday, indicating that Caesars Entertainment had received multiple, “unsolicited bids that have exceeded $4 billion”. The company is reportedly working with Raine Group LLC, and investment banking firm, to evaluate the offers.
A source confirmed to WSJ that suitors range from gaming, media and entertainment groups, to financial companies.
Mitch Garber, the head of Caesar’s interactive social and online gaming arm, said there is no formal or guaranteed sale on the table. But considering the financial condition of the parent company, Garber told WSJ, “We want to hear what people have to say, for sure.”
Caesars May Be Denied Right to Sell CIE
Caesars Entertainment filed for Chapter 11 protection last year. That could pose a problem for the sale of CIE, as creditors may decide the loss of one of Caesars only profitable units is unacceptable in terms of future growth, and file litigation to prevent a potential sale.
There are already open complaints from bondholders who were displeased with CIE’s acquisition of the World Series of Poker brand and other moves made prior to last year’s bankruptcy filings. A court-appointed examiner told WSJ that the bankruptcy case could easily result in damages being awarded to creditors over the WSOP dispute.
Caesars has denied any wrongdoing in its pre-bankruptcy moves, and in the same breath, warned that additional litigation against them in the current bankruptcy hearing could lead to Chapter 11 for CIE, as well.
Growth of CIE
The interactive arm was established in 2009 to head up the company’s social, mobile and gaming operations, and to oversee operation of the World Series of Poker, which runs a multitude of live circuit events around the world each year, culminating into the most prestigious poker festival of all, the WSOP in Las Vegas.
Two years later, CIE acquired Playtika, a developer of casino-style social gaming applications that include Slotomania. Since then, CIE has become one of the world’s largest online and mobile social gaming companies, generating annual sales of about $800 million.
Slotomania is currently on the Top 10 list for highest grossing casino-style gaming apps.These mobile apps now account for a staggering 97% of CIE’s revenue, despite the fact that the games are free to play.
Records indicate that CIE’s social casino division has attracted about 22 million unique users, about 4% of which take advantage of in-app purchases. That revenue, combined with advertising sales, generated over $200 million in profit for CIE in Q1 2016 alone.