Why Caesars Entertainment's Shares Have Jumped 74.1% in 2019

What happened

Shares of gambling giant Caesars Entertainment (NASDAQ: CZR) jumped 74.1% in the first half of 2019, according to data provided by S&P Global Market Intelligence , on buyout speculation and a subsequent announcement.

So what

After much speculation, Eldorado Resorts (NASDAQ: ERI) announced on June 24 that it was buying Caesars Entertainment for $12.75 per share in a deal that valued the company at about $17.3 billion . The buyout will be paid for with $8.40 per share in cash and 0.0899 shares of Eldorado for each share of Caesars Entertainment. Based on today's share price, that's a value of $12.86 per share of Caesars Entertainment.

Panoramic view of the Las Vegas Strip.

Image source: Getty Images.

Activist investor Carl Icahn had been pushing for a sale of Caesars after building a large stake and demanding seats on the board of directors. He clearly won and now the casino icon is being sold to the much-smaller Eldorado.

Now what

The buyout from Eldorado is high risk because it layers on even more debt to an already-highly leveraged Caesars Entertainment. But for current investors it's a chance to get a premium on their stock and cash in on Icahn's buyout push. There won't be another one-time pop in the second half of the year, but now investors will want to start watching Eldorado's performance because about one-third of the buyout is in the company's shares and it needs to operate perfectly to make this deal a winner over the long term.

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Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Personal Finance , Stocks
Referenced Symbols: CZR , ERI

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