Caesars executives set to receive millions in severance pay

By Liz Benston (contact)

Tuesday, Jan. 25, 2005 | 10:40 a.m.

The top three executives of Caesars Entertainment Inc. are expected to receive severance payments totaling at least $10.7 million upon the company's acquisition by Harrah's Entertainment Inc.

The payments include salaries and bonuses but don't include roughly $82 million worth of Caesars shares, stock options and grants of restricted stock held by the executives. Certain executives "critical to the continued operation of Caesars through the completion of the merger" also will receive another $19 million in "stay bonuses" upon the close of the deal.

Upon the close of the acquisition, Caesars President and Chief Executive Officer Wally Barr will receive salary and bonus awards totaling $6.7 million, General Counsel and Secretary Bernard DeLury Jr. will receive salary and bonus awards valued at $2.7 million and Interim Chief Financial Officer Wesley Allison will receive $1.3 million.

Barr, DeLury and Allison also are expected to receive $1 million, $600,000 and $500,000 in "stay bonuses," respectively.

The payments were revealed in a proxy statement filed Monday with the Securities and Exchange Commission. Caesars shareholders are scheduled to vote March 11 on the $9.4 billion deal, which would create the world's largest gaming company. Harrah's shareholders also will vote March 11 to issue millions of additional shares intended to buy out Caesars executives and shareholders.

Both companies expect the acquisition to close by the end of June. The deal is subject to approvals by federal and state regulators in addition to a vote of Caesars shareholders.

The three executives also will be able to sell their holdings of Caesars stock and stock options upon the close of the deal. According to the buyout agreement, Caesars shareholders will be entitled to exchange each share of Caesars stock for about .32 shares of Harrah's stock.

At Monday's stock price for Harrah's, Barr's stake in Caesars would be converted to about 1.1 million shares of Harrah's at a value of $70.6 million. Barr has about 2.5 million Caesars options and 864,401 shares of Caesars stock.

DeLury's stake in the company would be converted to 137,377 shares of Harrah's at a value of $8.7 million. DeLury has 271,800 options and 151,290 shares of stock.

Allison's stake in the company would be converted to 43,761 shares of Harrah's at a value of $2.8 million. Allison has 106,100 options and 28,673 shares of stock.

Caesars Board Chairman Stephen Bollenbach, chief executive of Hilton Hotels Corp., would be entitled to exercise 3 million Caesars stock options worth about $62 million at Monday's stock price.

These numbers don't take into account the cost of acquiring the stock underlying the options, which would significantly reduce net proceeds from stock sales by Bollenbach and the three executives.

Harrah's expects to issue 67.7 million shares of stock in connection with the acquisition, with former Caesars shareholders having a 37.4 percent stake in Harrah's after the deal closes.