Caesars Agrees to Be Taken Over by Fertitta in $5.7 Billion Deal

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1:23Scarlet Fu:Learn more at adobe.com slash do that with Acrobat. Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. All right, it's Thursday, but there's still some M &A deals to talk about. It's a fairly sizable one, if not one that we had anticipated for a while. Yeah, and I'm glad we have our next guest because it's all about the debt side of the balance sheet. All right, let's talk to Jody Lurie.

2:05Scarlet Fu:Jody Lurie is one of our credit analysts here, and she covers the travel and leisure sector for us here at Bloomberg Intelligence. And it's about Caesars agreeing to buy, I should say, being taken over by Tillman Fertitta. Fertitta Entertainment is paying Caesars shareholders$31 a share in cash. But in order to pay that cash, they're going to have to take out some debt. So, Jody, this is something that, you know, feels like it's a long time coming because Tillman Fertitta has been working on this for a while. Right, right. So, Scarlett, I mean, I think, you know, this has been rumored about since actually around the time of the Ides of March.

2:40I was super excited that the announcement would happen on the Ides of March, just for all the references with Caesars. Unfortunately, we had to wait another couple months. That said, I think, you know, what's been so compelling about this story, and I think what sort of brings up a lot of uncomfortableness in the bond market is the history with the name. Now, mind you, the Caesars now is actually El Dorado that bought Caesars out of bankruptcy. And that's not the same Caesars that we're talking about that was the leverage buyout that went through the restructuring. And even so, I think a lot of bondholders, for good reason, are a little bit uncomfortable by this story in general.

3:20So I've got a net debt to EBITDA, and I went through the Chase Manhattan Bank credit training program way back in the day. Nice, nice. But I've got EBITDA of only like three points. I got north of six times on a leverage basis. Jody, people like you, you guys don't like that. No, no, we don't, Paul. And to make matters worse, the big question that we're grappling with is whether or not the change of control provision gets executed. Not to go into too much detail, but to make it as simple as possible. In the course of a transaction, there's some bond terms that allow bondholders to put the bonds back to the company.

3:56And so in those instances, you get 101 % of par. And that's not potentially happening here. We're not sure at the moment. And what we're seeing, though, is that if you look at the bonds, they're not trading like they would be put back at 101 percent of par. So every indication we're seeing is that perhaps that's not going to get executed, which means that it's only, you know, about a six billion dollar price tag in terms of borrowing as opposed to an 18 billion dollar price tag in terms of borrowing. So that's a big nut to sort of grapple with is whether they have to refinance all that almost$12 billion of debt or if they just have to issue new debt and lever up the balance sheet further and bondholders are along for the ride.

4:41Scarlet Fu:OK, so anyway, you look at it, there's going to be a lot of moving parts here in order to get this deal done. Jody, you mentioned that there's some discomfort here for Caesars bondholders. Is this going to get in the way of there being enough demand? I mean, is this going to affect pricing and the concessions that might need to be made? I think, Scarlett, it really depends on timing. It depends on the communication there. We've we've been really sort of surprised over and again by the appetite of of bondholders and potential creditors out there. Now, will they have to pay up for it? It's very possible.

5:18And I think that that creates the sort of interesting component, too, is that if you're talking about a company that is already having issues from a profitability perspective. Cash flow hasn't been where it wants to be. Management was focused up until Icon got involved last year. They were actually focused on deleveraging, but they weren't getting EBITDA. So they were bringing down debt and they were refinancing debt and they were improving the capital structure, but EBITDA wasn't budging. So now we're in a scenario where we say, okay, we're going to, you know, lever up the company further from a net profit, a cash flow standpoint, what does that necessarily mean if they're going to be paying up on an interest basis?

5:58So it's really a complicated conversation. And I think it's one where nobody's going to be looking at this lighthearted if and when the deal goes through and if and when they do issue debt. I think there's going to be a lot of people culling over many documents to decide if it makes sense for them.

6:16Scarlet Fu:Stay with us. More from Bloomberg Intelligence coming up after this. If your finance team spends more time finding data than using it, if there's one entity here and one here and one here and one here, if scaling your business feels like starting over, you need the Intuit ERP. Intuit Enterprise Suite is the AI-native ERP solution that's powerful, painless, and proven. Learn more at intuit.com slash ERP. The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across HR, IT, and procurement processes, we've reduced costs by millions, slash repetitive tasks, and freed thousands of hours for strategic work.

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7:41Learn more at adobe.com slash do that with Acrobat. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. Scarlett Phil and Paul Sweeney live here in our Bloomberg Interactive Brokers studio streaming live on YouTube as well. A lot of tech news, as always. And so fortunately, we have an expert that can help us out here. Caroline Hyde, B-Tech co-anchor for Bloomberg News joining us here in our studio. Caroline, let's start with Snowflake.

8:18There's a software company that said, we're doing just fine, thank you. And the stock is up like 30 % or something crazy. It is adding$22 billion to its market cap on the day. It is surging 35 % because its product revenue is up 34%. And it guided that that's the kind of rate you should be expecting. This growth rate is going to be about 31 % for the full year. and it's all about AI being intertwined into this business. They've got Cortex, which is their coding tool, more than 7 ,000 subscriptions to that already. And it's just adding to the annual revenue run rate where you can see monetization of generative AI.

8:54And also, look, they're striking big deals with Amazon, which seems to be a bit of a win-win. Yes, Amazon gets$6 billion of Snowflakes for infrastructure and chips, but Snowflake in return gets more deeply intertwined into Amazon's business model. They can build out to get more customers and also they get more efficient, cheaper chips. So the idea is they bring down their own computing costs.

9:12Scarlet Fu:Okay, so that's the kind of news that investors want to see. Marvell is a chip maker, right? It is. And the stock is down, but the headlines sound pretty positive. Yeah, like this is a company that many had been excited running into. Like it was up about 100 % so far, year to date. And the rally had been extending overnight. Maybe we pull back a bit today. Maybe there is profit taking. but shares initially post-market in the pre-market had been higher as the results of the outlook look pretty good. It's all about, again, AI. It's all about ASICs. It's about custom chips being built. This is about the future of how we're not just NVIDIA as the only key winner.

9:50Look, with Amazon striking its deal with Snowflake, it's seeing its Graviton chips being used a little bit more, maybe replacing an Intel. And Blue Bank Intelligence is saying around Marvell that they're raising the fiscal 2027 and 2028 sales outlook by about 5%, 10%. Stronger data center demand is really what's driving this accelerating growth. This is what investors want to see, a re-acceleration of growth, organic acceleration of growth. And that is coming in the back of whether it's AI adoption, whether it's AI infrastructure, no matter how you cut it. But maybe with some of these stocks, they have just run so far, so far.

10:22So remember, like the likes of Snowflake have been pretty beaten up running into these numbers. It's interesting you mentioned, like with Snowflake, if you put up the numbers, and that's what a lot of, like Anurag Rana was saying, hey, these software companies, They've been beaten up. So the only recourse you have is to put up the numbers. Snowflake did. I thought Salesforce did last night as well, but stocks only up like 1 % and their guidance was a little tepid relative to expectations. So maybe they didn't get the convincing job that they needed. I mean, what more can Mark Benioff say apart from repeating that it was a record quarter and it was record sales and record cash pile, but people really want to see this acceleration of organic growth.

10:56Now, we know that Mark Benioff has been very good at acquisitions over the years and Informatica was helping with this latest quarter, and we saw an addition of revenue there. But how much of this is actually Salesforce's bread and butter, more subscriptions, more bums on seats is kind of the way they're still currently asking for to be paid here. And with Anna Ogran has done such great work from Bloomberg Intelligence side saying, look, there is still actually, apart from AI, there is a reticence in IT spending right now. We are nervous about the macro. So is Agent Force going to make up for that?

11:28The annual revenue run rate there is going to be$1.2 billion. That's nothing to be sniffed at but in the grandest scheme of revenues for for crm for for salesforce it's only a few percentage points we need to see more addition there i think great context and um

11:41Scarlet Fu:caroline before we let you go i understand that you were part of a team that won an emmy we did i'm a little tired today because the emmys we were my first time going and yeah we won for primer we do on bloomberg originals uh we do a really interesting 20 minute primer on anything to do with technology, really. We've had, it was our first series that was up for the award and then all about magnets and how important geopolitically they are. Why China versus US? And these things keep coming back. We've got the latest, we've just finished the latest series, series two, where it's about nuclear, it's about semiconductors.

12:15It's about things that you're hearing about time and time again. How can you get an evergreen, non-hyped view on what this technology really means? Cut through the jargon and we won an Emmy. I'm so excited. Where's the trophy? Well, they're back being like etched into. Apparently they're quite expensive. You get one for free, which Alan Jeffries has got, who's the amazing producer on the show. And apparently we've got to wait a few weeks for ours. You have to order the rest. Got to order the rest. I see.

12:40Scarlet Fu:I don't just walk around with it. I know. I've got a lot of photos. I'm just going to throw photos your way. You can dine out on that one for a while. Stay with us. More from Bloomberg Intelligence coming up after this. What if you could have more wins? More support? More sound effects? At LPL Financial, we like the sound of that. Because LPL offers more. Advisors, what if you could have more ways to help your clients? Ready to invest? What if you could find an advisor that really understands you? When it comes to your finances, your business, your future, at LPL, we ask, what if you could? Paid advertisement.

13:16Scarlet Fu:Investing involves risk, including potential loss of principal. LPL Financial LLC. Member FINRA SIPC. You need to make a huge presentation in an hour. Adobe Acrobat uses AI to take all your documents and generate a presentation with a single click. Build slides quickly and streamline the process. Need a last-minute pitch deck? Do that with Acrobat. Need to level up your presentation design? Do that with Acrobat. You have 30-plus documents that need to be simplified into a proposal. Do that. Do that. Do that with Acrobat. Learn more at adobe.com slash do that with Acrobat. Support for the show comes from Public.

13:55Lately, it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades, and others feel less like investing and more like a game. Public is positioned differently. It's an investing platform for people who are serious about building their wealth. On Public, you can build a portfolio of stocks, options, bonds, crypto, without all the bugs or the confetti. Retirement accounts, yep. High-yield cash, yes again. They even have direct indexing. Public has modern design, powerful tools, and customer support that actually helps. Go to public.com slash market and earn an uncapped 1 % bonus when you transfer your portfolio.

14:34That's public.com slash market. Add paid for by Public Holdings. Brokered services by Public Investing, member FINRA SIPC. Advisory services by Public Advisors, SEC Registered Advisor. Crypto services by ZeroHash. All investing involves risk of loss. See complete disclosures at public.com slash disclosures. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Well, one of the derivative plays of the growth of AI has been who's going to potentially lose in an AI world.

15:13And a lot of folks were calling out earlier this year software stocks, particularly software as services stocks. Names we've kind of all thought of as kind of Teflon names. Like a Salesforce.com, Salesforce reported numbers last night. I don't know. The numbers look really good to me. The stock's up 1%, but they've got to convince the street that they can continue to grow in a world of AI. So did they get it done last night? Anurag Rana joins us, technology analyst for Bloomberg Intelligence. Anwar, what did you hear from CRM, Salesforce, from their quarter? So one of the most important things we learned yesterday was they are actually pivoting very strongly towards AI and, you know, instead of subscription, but usage-based products.

15:57And the momentum is high, but what happens is whenever you go through this transition, when you don't grow seeds, you will see a little bit of blip in terms of the bookings growth. So organically, if you take out Informatica acquisition, we are still looking at, you know, soft 8%, 9%, 10 % or so booking growth at this point. And I think that's where some of the concerns are. On the positive side, as I said, their usage of token is actually skyrocketed. And the company actually was very confident in calling out a second half rebound in organic sales growth. And I think we're all trying to figure out whether that will happen or not.

16:34Right.

16:34Scarlet Fu:And of course, Salesforce's own AI tool is called AgentForce. And that's something that has actually seen revenue pick up over the past couple of months and years. Anurag, you had mentioned the Informatica purchase. Does the advent of AI and the threat of it taking over software companies or taking over the roles of software companies mean that Salesforce needs to do more M &A? So I think the company like Informatica, which is a company that does software for data management, I think this is where the biggest difference is going to be between consumer AI and enterprise AI because data is the biggest differentiator for enterprise AI.

17:14So all the companies in the world need to figure out what is their data strategy. How are they going to take a look at their internal data, whether that's finance data, customer service data? How are they going to pull all of that together? And then they're going to train that or fine tune that with a large language model. And that's where Informatica comes in. So to your broader questions, Salesforce should be doing more acquisitions. But frankly speaking, yesterday we saw a massive buyback. And I think that's what I like more at this point, given where the stock is rather than acquisitions. Anurag, talk to us about how these software companies typically generate their revenue.

17:51I'm particularly interested in the per seat model, how that works and how AI may disrupt that, because that's what I'm understanding as maybe a risk point. Yeah, that is the single biggest important factor right now. In fact, that's the reason we are not so bullish in terms of the organic growth rate of software right now, because the number of seats are not growing. People are not hiring at that same pace they were. In fact, you see layoffs right now. So when you see that, whether you're selling HR software or software to salespeople, you're going to see a decline in that. What Microsoft is basically telling people is it's not going to be just a subscription-based model anymore.

18:30It's going to be subscription and a usage-based model, which is just because you have a subscription to Gemini or a co-pilot, that doesn't mean you can just burn all the tokens that you want. You will get up till a certain amount of tokens to burn. And after that, you're going to be charged or metered for that use. We see that in coding tools right now. We see that with cloud computing services that's on AWS infrastructure. And I think a lot of that model comes to the SaaS model that instead of just being seed-based, it's going to be either entirely consumption-based or a combination of consumption and subscription.

19:04Scarlet Fu:Is that something that investors have priced in already, Anurag, or is that something they're still working out? I think one of the negative things about the software industry is that because of that disruption in the model, they will not be as profitable at this point. And that's partially the reason why the valuations are going down. A lot of these companies are making slow pivot to that shift because on the buyer's side, you really don't want to sign up for an unlimited plan without knowing what your token bill will be by the end of the month or the end of the quarter. At the same time, the software company does not want to give up that lucrative, very high margin seed-based business.

19:42So I think what we are seeing is a little bit of both companies are experimenting with pricing models that are consumption-based. The buyers are doing the same thing. And I think it will take, I think, two to three years before we finally figure out what combination of seed-based and consumption-based model wins. We think it's going to be more of an enterprise agreement where somebody like Salesforce or Microsoft will tell a company, you spend this much money with me every month and we're going to give you all these products that go with it.

20:14Scarlet Fu:Stay with us. More from Bloomberg Intelligence coming up after this.

20:37Scarlet Fu:presentation design? Do that with Acrobat. You have 30 plus documents that need to be simplified into a proposal. Do that. Do that. Do that with Acrobat. Learn more at adobe.com slash do that with Acrobat. Support for the show comes from Public. Lately, it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades, and others feel less like investing and more like a game. Public is positioned differently. It's an investing platform for people who are serious about building their wealth. On Public, you can build a portfolio of stocks, options, bonds, crypto without all the bugs or the confetti.

21:17Retirement accounts? Yep. High-yield cash? Yes, again. They even have direct indexing. Public has modern design, powerful tools, and customer support that actually helps. Go to public.com slash market and earn an uncapped 1 % bonus when you transfer your portfolio. That's public.com slash market. Ad paid for by Public Holdings. Brokered services by Public Investing, member FINRA SIPC. Advisory services by Public Advisors, SEC Registered Advisor. Crypto services by ZeroHash. All investing involves risk of loss. See complete disclosures at public.com slash disclosures.

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22:28Scarlet Fu:See how your business can get stronger and go farther with Chase for Business. Learn more at Chase.com slash business. Chase for Business. Make more of what's yours. The Chase mobile app is available for select mobile devices. Message and data rates may apply. JPMorgan Chase Bank N.A. Member FDIC. Copyright 2026. JPMorgan Chase and Company. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. Kohl's shares are up 16 percent on better than expected results.