(CN) – Caesars Entertainment is set to be acquired by Eldorado Resorts for $17.3 billion in cash and stock to soon become the largest owner and operator of gaming facilities in the U.S., but a shareholder class action alleges that statements filed with the Securities and Exchange Commission omitted crucial information about the deal.
Filed in Delaware District Court by Caesars stockholder Dennis Palkon, the lawsuit names both companies and numerous executives and directors for Caesars Entertainment as defendants. The proposed class represents individuals and entities who collectively own more than 682 million shares of Caesars outstanding common stock.
The acquisition was announced on June 24, 2019, with Caesars stockholders set to receive $8.40 in cash and 0.0899 of a share of parent stock for each share of Caesars they own. According to the lawsuit, the registration statement filed with the SEC left out material information about financial projections of both companies, including all line items used to calculate earnings before interests, taxes, depreciation, amortization, and restricting or rent costs (EBITDAR), earnings before interest, tax, depreciation and amortization (EBITDA) and unlevered free cash. The lawsuit further alleges that the statement omitted an analyses performed by Caesars financial advisor, PJT Partners, potential conflicts of interest involving PJT, and how much the advisor was paid.
“The disclosure of projected financial information is material because it provides stockholders with a basis to project the future financial performance of a company, and allows stockholders to better understand the financial analyses performed by the company’s financial advisor in support of its fairness opinion,” the lawsuit says.
The class claims if the missing information were disclosed it “would significantly alter the total mix of information available to the company’s stockholders.”
The merger agreement stipulates a “no-solicitation” provision that prohibits Caesars from soliciting alternative proposals and a “matching rights” provision with respect to any superior offer made to the company. Eldorado will also pocket over $418 million if Caesars terminates the deal.
The lawsuit is seeking to stop the transaction, or an award of rescissory damages if it goes through, and an order to disseminate an accurate registration statement, among other relief.
Stockholders are represented by Brian D. Long and Gina M. Serra of Rigrodsky & Long in Wilmington, Del.