Caesars Entertainment Corp. (CZR) was surging Monday after announcing it will merge with its Caesars Acquisition Co. (CACQ) unit in an all-stock transaction that will combine the two publicly-traded affiliates. Shares of the Las Vegas-based casino operator were climbing 15% to $15.55.
In a statement, Caesars said the merger will support the restructuring of the gaming giant's operating unit, Caesars Entertainment Operating Co. (CEOC), and improve the company's leverage and capital structure.
"Upon completion of the merger and [CEOC] restructuring, Caesars Entertainment Corp. entities will be financially strong, with significantly reduced leverage and a much simpler and straightforward corporate structure," Caesars Entertainment CEO Gary Loveman said in the statement.
The news boosted the stock prices of both merger parties. Caesars Entertainment's stock was up about 19% Monday to $16.07 with a $2.32 billion market cap after closing at $13.49 on Friday, while Caesars Acquisition was up nearly 9% to $10.26 with a $1.41 billion market cap, following a $9.46 close on Friday.
The merged company will operate as Caesars Entertainment and trade as CZR. It will have $1.7 billion in cash on its balance sheet, not counting the cash held by CEOC. According to the Monday statement, the merged company will produce positive free cashflow.
Caesars Entertainment shareholders will own 62% of the combined company while Caesars Acquisition investors will hold the remaining 38%, after each share of Caesars Acquisition class A common stock is exchanged for 0.664 share of Caesars Entertainment common stock.