S-1 1 d538772ds1.htm FORM S-1 Form S-1
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As filed with the Securities and Exchange Commission on July 10, 2013

Registration No. 333-                        

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

CAESARS ACQUISITION COMPANY

(Exact name of registrant as specified in its charter)

 

 

 

DELAWARE   7993   46-2672999

(State or other jurisdiction of

Incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

One Caesars Palace Drive

Las Vegas, NV 89109

(702) 407-6000

(Address, including zip code, and telephone number, including area code, of Registrant’s Principal Executive Offices)

 

 

Mitch Garber

Chief Executive Officer

Caesars Acquisition Company

One Caesars Palace Drive

Las Vegas, NV 89109

(702) 407-6000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

With a copy to:

Monica K. Thurmond, Esq.

Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, New York 10019-6064

(212) 373-3000

 

 

Approximate date of commencement of proposed sale to public: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    þ

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering.    ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   þ  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of each Class of

Securities to be Registered

  Proposed
Maximum
Aggregate
Offering Price(1)
 

Amount of

Registration Fee

Class A common stock, par value $0.001 per share

  $ 1,182,000,000   $161,225

 

 

(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended (the “Securities Act”). Represents the estimated maximum aggregate gross proceeds from the exercise of the maximum number of subscription rights that may be issued.

 

 

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion

Preliminary Prospectus dated July 10, 2013

PROSPECTUS

CAESARS ACQUISITION COMPANY

Up To 125,359,584 Shares of Class A Common Stock Issuable Upon the Exercise of Subscription Rights At $9.43 Per Share

 

 

Caesars Entertainment Corporation, or “Caesars Entertainment,” is distributing to each holder of its common stock as of the close of business on                    , 2013, the record date, at no charge, of non-transferable subscription rights to purchase up to an aggregate of 125,359,584 shares of Class A common stock, par value $0.001 per share, of Caesars Acquisition Company, or “CAC,” at a price of $9.43 per whole share, or the “rights offering.” Each holder of Caesars Entertainment’s common stock as of the record date will receive one subscription right for each full common share owned by that stockholder as of the record date. Each subscription right will entitle its holder to purchase from CAC one share of CAC’s Class A common stock. Additionally, holders of subscription rights who fully exercise all of their basic subscription rights may also make a request to purchase additional shares of CAC’s Class A common stock, through exercise of the over-subscription privilege, although we cannot assure you that any over-subscriptions will be filled.

To the extent you properly exercise your over-subscription privilege for an amount of shares of Class A common stock that exceeds the number of the unsubscribed shares allocated to you, the subscription agent will return to you any excess subscription payments, without interest or penalty, as soon as practicable following the expiration of the rights offering. We are not requiring a minimum individual or overall subscription to complete the rights offering. We have engaged                      to serve as the subscription agent (the “Subscription Agent”) for the rights offering,                     to serve as information agent (the “Information Agent”) for the rights offering and                     to serve as solicitation agent (the “Solicitation Agent”) for the rights offering.                     will hold in escrow the funds we receive from subscribers until we complete or cancel the rights offering.

The subscription rights will expire if they are not exercised by 5:00 p.m., New York City time, on                     , 2013, the         th business day following the distribution of the rights, unless CAC extends the rights offering period. The rights offering is subject to the satisfaction or waiver by Caesars Entertainment or CAC, as applicable, of certain conditions. In addition, CAC has the right to withdraw and cancel the rights offering if, at any time prior to its expiration, the board of directors of CAC determines, in its sole discretion, that the Transactions cannot proceed on the terms contemplated. See “The Rights Offering—Conditions, Withdrawal and Cancellation.”

As of the date hereof, approximately 70% of the common stock of Caesars Entertainment is beneficially owned by Hamlet Holdings LLC (“Hamlet Holdings”), the members of which are comprised of three individuals affiliated with affiliates of Apollo Global Management, LLC (collectively with its subsidiaries, “Apollo”) and two individuals affiliated with affiliates of TPG Global, LLC (together with its affiliates, “TPG,” and together with Apollo, the “Sponsors”), through an irrevocable proxy that gives Hamlet Holdings sole voting and sole dispositive power over the stock that is held by funds affiliated with and controlled by the Sponsors and their co-investors. The Sponsors have advised Caesars Entertainment that the affiliates of the Sponsors holding common stock of Caesars Entertainment intend to exercise subscription rights of at least $500.0 million (which would represent approximately 42% of our Class A common stock assuming the subscription rights are exercised in full by all holders of the subscription rights), though they have not entered into any agreement to do so. Consummation of the Transactions is contingent on the exercise of subscription rights of at least $500.0 million by affiliates of the Sponsors. The affiliates of the Sponsors, along with their co-investors, plan to grant Hamlet Holdings an irrevocable proxy for sole voting and sole dispositive power of the Class A common stock of CAC received as a result of this offering (the “Sponsor CAC Proxy”). As a result, we expect that Hamlet Holdings will beneficially own at least     % of our Class A common stock, and that we will qualify as and, if listed, elect to be, a “controlled company” under the NASDAQ Marketplace rules following the completion of the rights offering and the listing of our Class A common stock, if any. This election would allow us to rely on exemptions from certain corporate governance requirements otherwise applicable to NASDAQ-listed companies. See “Risk Factors—Risks Related to Our Class A Common Stock—We will be a “controlled company” within the meaning of the NASDAQ Marketplace rules and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements.”

You should carefully consider whether to exercise your subscription rights before the rights offering expires. All exercises of subscription rights are irrevocable. However, exercises of subscription rights will be revocable if there is a fundamental change to the terms of this offering and related transactions.

The purchase of and investing in shares of our Class A common stock involves a high degree of risk. You should read the section entitled “Risk Factors” beginning on page 41 for a discussion of certain risks that you should consider before exercising your subscription rights and investing in shares of our Class A common stock. Neither Caesars Entertainment nor CAC’s board of directors is making any recommendation regarding your exercise of the subscription rights.

The subscription rights are non-transferable. We intend to apply to list shares of our Class A common stock for trading on the NASDAQ Capital Market under the symbol “CGP,” however, we cannot assure you that we will achieve a listing upon completion of this offering or thereafter. No public market currently exists for our Class A common stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

Prospectus dated                     , 2013.


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TABLE OF CONTENTS

 

Prospectus Summary

     1   

Questions and Answers About the Company and the Rights Offering

     29   

Risk Factors

     41   

Cautionary Statements Concerning Forward Looking Statements

     77   

Market and Industry Data and Forecasts

     79   

Use Of Proceeds

     80   

Capitalization

     81   

Unaudited Pro Forma Condensed Financial Information

     82   

Selected Historical Condensed Financial Data of Caesars Acquisition Company and Selected Historical Combined Condensed Financial Data of Growth Partners

     92   

Dividend Policy

     93   

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     94   

Industry

     124   

Business

     132   

Gaming Regulatory Overview

     151   

Management

     160   

Security Ownership of Certain Beneficial Owners and Management

     171   

Certain Relationships and Related Party Transactions

     173   

Description of Indebtedness

     180   

Description of Capital Stock

     183   

Plan of Distribution

     187   

The Rights Offering

     188   

Material U.S. Federal Income Tax Considerations

     198   

Shares Eligible for Future Sale

     204   

Legal Matters

     206   

Experts

     206   

Where You Can Find Additional Information

     206   

Index to Financial Statements

     F-1   

You should rely only on the information contained in this prospectus or to which we have referred you. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

Caesars Entertainment Corporation and its subsidiaries have certain proprietary rights to a number of trademarks used in this prospectus that are important to its business, including, without limitation, Caesars, Harrah’s, Horseshoe, Total Rewards and Planet Hollywood. Caesars Interactive Entertainment, Inc. has proprietary rights to the trademarks related to World Series of Poker. We have omitted the ® and trademark designations for such trademarks named in this prospectus.

 

 

 

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PROSPECTUS SUMMARY

The following summary contains information about Caesars Acquisition Company and its Class A common stock. It does not contain all of the information that may be important to you in making a decision to participate in the offering. For a more complete understanding of Caesars Acquisition Company, we urge you to read this prospectus carefully, including the sections entitled “Risk Factors,” “Cautionary Statements Concerning Forward Looking Statements” and “Where You Can Find Additional Information.” Unless otherwise noted or indicated by the context, (a) the terms “CAC,” “the Company,” “we,” “us” and “our” refer to Caesars Acquisition Company, (b) the term “CGP LLC” refers to Caesars Growth Partners, LLC and (c) the term “Growth Partners” refers to Caesars Growth Partners, LLC and its consolidated subsidiaries, in each case, after giving effect to the consummation of the Transactions described below under “—The Transactions.

Caesars Acquisition Company

CAC is incorporated under the laws of Delaware and was formed to make an equity investment in Growth Partners, a joint venture between CAC and Caesars Entertainment, the world’s most diversified casino-entertainment provider and the most geographically diverse U.S. casino-entertainment company. CAC does not expect to own any other material assets or have any operations other than through its interest in CGP LLC. Upon consummation of the Transactions (as described below), CAC will serve as CGP LLC’s managing member and sole holder of all of its outstanding voting units, and Caesars Entertainment and/or certain of its subsidiaries will hold all of CGP LLC’s outstanding non-voting units. The voting units and non-voting units of CGP LLC participate ratably in distributions and are identical economically, other than as described under “Certain Relationships and Related Party Transactions—Limited Liability Company Agreement of CGP LLC—Liquidation Right” and “Certain Relationships and Related Party Transactions—Agreements with Caesars Entertainment and its Subsidiaries—Limited Liability Company Agreement of CGP LLC—Call Right.” Caesars Entertainment, through its subsidiaries, will own between an estimated 57% and 77% of the economic interests in CGP LLC, in each case, comprised of the value of the Contributed Assets (as defined below) and an additional 5%. The percentage owned will depend on the number of subscription rights exercised in the rights offering. This ownership range is also subject to adjustment at the closing of the Transactions due to the relative value of the Contributed Assets and certain other potential adjustments. See “—The Transactions.”

Growth Partners

Growth Partners is a casino asset and entertainment company focused on acquiring and developing a portfolio of high-growth operating assets and equity and debt investments in the gaming and interactive entertainment industry. Upon consummation of the Transactions, Caesars Entertainment and/or certain of its subsidiaries will own all of the outstanding non-voting units of CGP LLC and will be the majority economic shareholder of Growth Partners, and therefore will have a large direct stake in Growth Partners’ financial performance and growth potential. Through its relationship with Caesars Entertainment, Growth Partners has the ability to access Caesars Entertainment’s proven management expertise, brand equity, Total Rewards loyalty program and structural synergies. With 45 million members, the Total Rewards loyalty program is considered to be one of the leading loyalty rewards programs in the casino entertainment industry, as evidenced by Caesars Entertainment receiving COLLOQUY’s Master of Enterprise Loyalty Award in September 2012.

We anticipate the combination of Growth Partners’ flexible capital structure and Caesars Entertainment’s leading brands and management capabilities will provide a competitive advantage in the pursuit of high return, capital intensive investment opportunities in land-based casino gaming, regulated online real-money gaming, and social and mobile games. Many development projects in the land-based casino and entertainment industries require lengthy and involved development and regulatory processes and therefore often require a significant

 

 

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initial capital outlay but have delayed cash flows generated from operations. Growth Partners’ capital structure is specifically designed to accommodate these dynamics, and we believe Growth Partners’ streamlined business model will create a unique venture-oriented investment vehicle for potential equity investors. In addition, social and mobile games industry characteristics and the speculative nature of online real money gaming in the United States are better served by a company with greater access to liquidity and equity capital. Therefore, the separation of this business from Caesars Entertainment’s core operating business and its leveraged capital structure will create a flexible organization that is well positioned to pursue business and growth strategies.

Through its two businesses—Interactive Entertainment and Casino Properties and Developments—Growth Partners will focus on acquiring or developing assets with strong value creation potential and leveraging interactive technology with well-known online brands. Growth Partners’ Interactive Entertainment business is expected to initially consist of Caesars Interactive Entertainment, Inc. and its subsidiaries (collectively referred to as “CIE” or “Caesars Interactive”), which has three businesses: social and mobile games, the World Series of Poker (“WSOP”) and regulated online real money gaming. Growth Partners’ Casino Properties and Developments business is expected to initially consist of Caesars Entertainment’s existing interests in the Planet Hollywood Resort and Casino located in Las Vegas, Nevada (“Planet Hollywood”), the casino to be developed by the Maryland Joint Venture (as defined below) in Baltimore, Maryland (the “Horseshoe Baltimore”), and a 50% interest in the management fee revenues to be received by certain subsidiaries of Caesars Entertainment Operating Company, Inc. (“CEOC”), a wholly-owned subsidiary of Caesars Entertainment, in connection with the management of Planet Hollywood and Horseshoe Baltimore. In addition, Growth Partners is expected to own a portfolio of debt investments consisting of notes previously issued by CEOC. These notes will provide Growth Partners with additional cash flow to fund future investment and acquisition opportunities.

When we consider new investment and acquisition opportunities, we will have to submit them to Caesars Entertainment. A committee of the board of directors of Caesars Entertainment comprised of disinterested directors will make the determination on behalf of Caesars Entertainment to (1) pursue any potential project itself or (2) decline the project for itself, after which Growth Partners may elect or decline to pursue the project. When Caesars Entertainment considers new investment and acquisition opportunities, Caesars Entertainment will have the option to (1) pursue any potential project itself or (2) decline the project for itself, after which Growth Partners may elect or decline to pursue the project. Although not required, we anticipate that any future investment and acquisition opportunities undertaken by Growth Partners will be managed by Caesars Entertainment and its subsidiaries. The CGP Operating Agreement (as described under “Certain Relationship and Related Party Transactions—Agreements with Caesars Entertainment its Subsidiaries”) will include a framework with respect to the structuring of compensation related to future projects between Caesars Entertainment and Growth Partners. In the event Caesars Entertainment declines an opportunity and Growth Partners undertakes the opportunity, Growth Partners will retain a 50% interest in the management fee to be received by Caesars Entertainment, unless otherwise agreed, and Growth Partners will acquire 100% of the new equity in such opportunity. With its equity-dominated capital structure and its relationship with Caesars Entertainment, we believe Growth Partners should be able to respond quickly to, and have access to required capital for, potential development opportunities. Because of its majority economic stake, Caesars Entertainment will have an incentive to bring opportunities to Growth Partners when Caesars Entertainment elects not to pursue such opportunities directly for itself.

Interactive Entertainment

By forming CIE, Caesars Entertainment recognized the importance of positioning itself for the convergence of interactive games, regulated online real money gaming and the “brick-and-mortar” casino-entertainment industry, while at the same time taking advantage of the synergies between them. CIE is a stand-alone company with an entrepreneurial culture that innovates upon the way brick-and-mortar gaming companies traditionally view and distribute casino entertainment.

 

 

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CIE has three distinct, but complementary, businesses that reinforce and build upon each other: social and mobile games, the World Series of Poker (“WSOP”), and regulated online real money gaming. It is the ecosystem created by the intersection of these three businesses, together with its relationship with Caesars Entertainment, including its rights to use Caesars Entertainment’s portfolio of brands and its access to the Total Rewards loyalty program, that we believe will allow CIE to capitalize on the growth of social and mobile casino-themed games and regulated online real money gaming, especially in the United States.

Social and Mobile Games. CIE has become one of the world’s leading interactive social and mobile casino-themed game providers. CIE’s current portfolio of games includes Slotomania, which was one of the top ten highest grossing casino-themed games on Facebook, Inc. (“Facebook”), iOS and Android platforms as of March 31, 2013 according to App Annie and www.facebook.com/appcenter. CIE’s launch of the Caesars Casino application on Facebook in January 2012 was the first visible instance of how CIE intends to leverage its relationship with Caesars Entertainment in the future. In December 2012, CIE acquired substantially all of the assets of Buffalo Studios LLC (“Buffalo Studios”), including the application Bingo Blitz, which is a leading bingo game on Facebook, Android and iOS. In June 2013, CIE acquired the World Series of Poker social and mobile game assets and intellectual property from Electronic Arts. The World Series of Poker social and mobile game is available on the Facebook platform, on the Amazon Kindle, Android devices and all iOS devices.

The World Series of Poker. CIE has derived considerable benefit from growing and building upon its ownership and management of the WSOP franchise. The WSOP, which was founded in 1970, had 74,766 entrants in its flagship annual tournament in Las Vegas in 2012 (the “WSOP Las Vegas”). The WSOP also benefits from a television contract with ESPN through 2017, sponsorship agreements with a number of leading brands, such as Miller Lite and Red Bull in 2012, and licensing arrangements for a wide variety of consumer products. CIE is positioning the WSOP brand to be one of the leading poker sites in Nevada, New Jersey and other states, if any, that legalize online real money gaming in the future.

Regulated Online Real Money Gaming. CIE has built the foundation of what it intends to be a leader in regulated U.S. online real money gaming environment. According to H2 Gaming Capital (“H2GC”), it is estimated that the regulated U.S. online real money poker market may generate up to approximately $9.6 billion in gross revenue annually. While online real money gaming has not been legalized at the federal level, in December 2011, Nevada approved interactive gaming regulations allowing for intrastate online poker and Delaware and New Jersey recently passed online real money gaming laws. The New Jersey legislation passed in February 2013 includes a provision for casino games such as slots, blackjack and roulette in addition to poker and allows only existing brick-and-mortar casino operators (or their affiliates) in the state to apply for a license to offer real money poker and casino games online to anyone within New Jersey state lines. CIE is actively participating in the U.S. lobbying effort for other states to follow Nevada, Delaware and New Jersey’s lead, and is supportive of a Federal framework as well. In December 2012, CIE received its operator’s license in Nevada and plans to launch in 2013 upon receipt of regulatory approval. Outside of the United States, CIE began offering real money online gaming in the United Kingdom (the “UK”) under the WSOP and Caesars brands in 2009 and entered the France and Italy markets through brand licensing agreements in 2011. In tandem with its lobbying efforts in the United States, CIE recently secured the use of two online real money poker software platforms for use in new markets: Fordart Limited’s (“888”) poker software through a licensing agreement and LB Poker SAS (“Barrière Poker”) through a source code assignment and co-development agreement. CIE believes that if online real money gaming continues to be legalized in the United States on either a state-by-state basis or on the federal level, it presents a substantial opportunity, translating into a potential large revenue generator for Growth Partners.

For the year ended December 31, 2012, our Interactive Entertainment segment generated net revenues of $207.7 million, net income of $34.1 million and Adjusted Segment EBITDA of $76.2 million. For the three months ended March 31, 2013, our Interactive Entertainment segment generated net revenues of $68.6 million,

 

 

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net loss of $24.8 million and Adjusted Segment EBITDA of $20.6 million. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Reconciliations of Adjusted Segment EBITDA of Net Income” for a discussion of Adjusted Segment EBITDA.

Casino Properties and Developments

Growth Partners’ portfolio of casino-related assets consists of Planet Hollywood and an investment in a casino project under development in Baltimore, Maryland, the Horseshoe Baltimore. In addition, Growth Partners is entitled to a 50% interest in the management fee revenues received by certain subsidiaries of CEOC in connection with the management of Planet Hollywood and Horseshoe Baltimore. Planet Hollywood and the interests in the management agreements provide a base of cash flow to supplement Growth Partners’ ongoing development opportunities, including its investment in the Maryland Joint Venture.

Details of Growth Partners’ existing list of currently operating and development projects are shown in the table below.

 

Property

  

Location

  

Status

   Ownership    

Anticipated
Opening Date

Planet Hollywood

Resort and Casino

   Las Vegas, NV    Operating      100   Open

Horseshoe

Baltimore

   Baltimore, MD   

Under development

     52 %(1)    Third quarter of 2014

 

(1) Represents an indirect ownership in the Maryland Joint Venture through a 58.5% ownership in CR Baltimore Holdings LLC, the developer of the Maryland Joint Venture, which in turn has an 88.6% direct interest in the Maryland Joint Venture. Following the closing of the CVPR Sale described below, Growth Partners’ indirect economic ownership of the Maryland Joint Venture will be approximately 41%.

For the year ended December 31, 2012, the Casino Properties and Developments segment generated net revenues of $303.7 million, net loss of $1.0 million and Adjusted Segment EBITDA of $69.1 million. For the three months ended March 31, 2013, the Casino Properties and Developments segment generated net revenues of $83.0 million, net income of $2.6 million and Adjusted Segment EBITDA of $21.9 million. The historical figures reflect that Planet Hollywood historically paid annual management fees of approximately $16.1 million to a subsidiary of CEOC pursuant to its management agreement and the Adjusted Segment EBITDA is calculated after giving effect to the payment of such management fees. As part of the Transactions, Growth Partners will pay $90.0 million for a 50% interest in the Planet Hollywood and Horseshoe Baltimore annual management fees. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Reconciliations of Adjusted Segment EBITDA to Net Income” for a discussion of Adjusted Segment EBITDA.

Planet Hollywood Resort & Casino

Planet Hollywood, which was originally constructed in 2001 and renovated in 2007, is a casino resort located on the Las Vegas Strip in Las Vegas, Nevada. Planet Hollywood was acquired by Caesars Entertainment in February 2010 and is managed by a subsidiary of CEOC and therefore benefits from Total Rewards, one of the leading loyalty rewards programs in the casino entertainment industry. Planet Hollywood benefits from its prime location on a 35-acre site on the east side of the Las Vegas Strip and is part of a contiguous strip of casinos owned by Caesars Entertainment, with which it shares certain services and costs.

Planet Hollywood includes a 2,500-room hotel, which offers deluxe guestrooms and suites. The facility also has an outdoor pool area and an approximately 32,000-square foot spa that is leased to a third party. In addition, the facility adjoins to a retail mall, the Miracle Mile Shops, with 170 retailers and 15 restaurants, and a 1,201

 

 

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room timeshare tower operated by Hilton Grand Vacations. The adjoining mall and timeshare tower, as well as the additional amenities featured at Planet Hollywood, stimulate additional traffic through the Planet Hollywood complex, including the casino and its amenities. For a description of amenities featured at Planet Hollywood, see “Business—Growth Partners—Casino Properties and Developments—Planet Hollywood Resort & Casino.”

Planet Hollywood’s 64,500 square foot casino features 1,100 slot machines and 79 table games. The casino offers a diverse selection of the most popular slot and video poker machines in a wide variety of denominations, and is also home to a race-and-sports-books facility. The casino’s live table games include traditional blackjack, craps and roulette, in addition to a variety of other popular games, such as Baccarat and Pai Gow Poker. Planet Hollywood’s casino also offers daily poker tournaments in an 11 table World Series of Poker-branded poker room, as well as a variety of live poker games including Texas Hold ‘Em and other casino poker games.

Planet Hollywood complements this product offering with both a high limit table game area featuring 9 high limit table games as well as a high limit slot area featuring over 60 high denomination slot machines. Additional amenities, such as an exclusive enclosed lounge and VIP cage access, target the needs of its VIP customer base. Planet Hollywood also features amenities such as ten food and beverage outlets, gift and merchandise shops operated by the Marshall Retail Group, over 80,000 square feet of convention, trade show and meeting facilities and a 7,000-seat theater known as PH Live.

Planet Hollywood targets a growing younger demographic segment that values the offerings of the non-gaming entertainment that complements the casino’s gaming activities. Growth Partners’ flexible capital structure will allow it to invest in Planet Hollywood and elevate its guests’ experience by offering premium, Hollywood-themed entertainment and non-gaming options that remain fresh and relevant. We believe these investments should lead to revenue and EBITDA growth.

Horseshoe Baltimore, Maryland

Growth Partners owns an indirect interest in CBAC Gaming, LLC (the “Maryland Joint Venture”), a joint venture with an affiliate of Rock Gaming LLC and other local investors. CBAC Borrower, LLC, a subsidiary of the Maryland Joint Venture (“CBAC Borrower”), holds a license to operate a casino in the City of Baltimore.

Caesars Entertainment is leading the development of the casino, and a subsidiary of CEOC will serve as the manager of Horseshoe Baltimore. After consummation of the Transactions, Growth Partners will receive a 50% interest in the management fee revenue received by a subsidiary of CEOC in connection with the management of Horseshoe Baltimore. The property is anticipated to be an integrated casino with a 110,000 square-foot floor holding approximately 2,500 video lottery terminals (“VLTs”), 100 table games and 30 poker tables. In addition to the gaming space, Growth Partners anticipates the casino facility at Horseshoe Baltimore will contain a 10,000 square foot meeting facility, seven restaurants and/or bars, and a Diamond Lounge for its highest-value gaming customers. The Maryland Joint Venture will also develop an adjacent 3,400-space parking garage, which will facilitate ease of access to the casino for its customers. The project is anticipated to open in the third quarter of 2014 at a cost of approximately $400 million. The Maryland Joint Venture is funded with approximately $107.5 million of total equity and approximately $340 million in debt. Growth Partners’ share of the equity contribution and of the ownership will be approximately 52%. Growth Partners, together with another member of the Maryland Joint Venture, have an agreement in principle to sell approximately 18% of the equity interest in the Maryland Joint Venture to CVPR Gaming Holdings, LLC, an existing third member of the Maryland Joint Venture (the “CVPR Sale”). The CVPR Sale is subject to regulatory approval. Following the closing of the CVPR Sale, Growth Partners’ equity contribution and indirect ownership in the Maryland Joint Venture will be approximately 41%, through its continued 58.5% indirect ownership in CR Baltimore Holdings LLC, which after the sale will own approximately 70% of the Maryland Joint Venture.

 

 

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As of the date of this prospectus, Caesars Entertainment has contributed $55.7 million of cash equity in the Maryland Joint Venture and may have to contribute up to an additional $22.3 million of capital contributions under the terms of Maryland Joint Venture’s operating agreement. Growth Partners will assume all of Caesars Entertainment’s uncalled capital commitments. On July 2, 2013, CBAC Borrower obtained a credit facility (the “Baltimore Credit Facility”) that provides for up to $310 million of project financing for the development of Horseshoe Baltimore. Concurrently with the closing of the Baltimore Credit Facility, CBAC Borrower also entered into a term loan facility that provides for up to $30 million of equipment financing (the “Baltimore FF&E Facility”). See “Description of Indebtedness” for descriptions of the Baltimore Credit Facility and the Baltimore FF&E Facility.

The Maryland Joint Venture represents a unique opportunity to enter a major market with favorable demographics. The casinos in Maryland draw customers primarily from the Washington D.C. Metropolitan Statistical Area (“MSA”), which encompasses Washington D.C. and portions of Maryland, Virginia and West Virginia, and it is the eighth largest MSA in the United States with over 5.5 million residents. The Washington D.C. MSA has more adults per gaming position than the average of eight comparable regional gaming markets, including Cincinnati, Pittsburgh and Philadelphia, indicating that the gaming market in Maryland can support additional casinos. In addition, the Washington D.C. MSA has favorable demographics, with a median income of $83,080 and average income of $106,509 compared to a national average of $42,494 and $55,999 respectively. For additional information, see “Industry—Maryland.”

In 2008, the Maryland General Assembly passed enabling legislation that limited gaming to five VLT facilities in predetermined geographic areas at a 67% gaming tax rate. See “Business—Growth Partners—Casino Properties and Developments—Horseshoe Baltimore, Maryland.” The Maryland Joint Venture was conditionally awarded a license in July 2012 and all conditions were removed in June 2013, provided that issuance of the license remains subject to completion and opening of the project to the general public and receipt of approvals from gaming authorities regarding the operations of the casino prior to its opening. In connection with the Baltimore Credit Facility, the Maryland Joint Venture transferred its license to CBAC Borrower, its wholly-owned subsidiary and the borrower under the Baltimore Credit Facility and the Baltimore FF&E Facility. A lawsuit has been filed challenging certain aspects of the project. See “Risk Factors—Risks Related to Growth Partners’ Casino Properties and Developments Business—Adverse outcomes in legal proceedings could adversely affect the Horseshoe Baltimore Casino, including a delay in construction and ultimately the opening of the casino and possible abandonment of the project.” For further discussion, see “Business—Growth Partners—Casino Properties and Developments—Horseshoe Baltimore, Maryland.”

CEOC Notes

Upon consummation of the Transactions, Growth Partners will own approximately $1.1 billion of aggregate principal amount of senior notes previously issued by CEOC (the “CEOC Notes”). The CEOC Notes have fixed interest rates ranging from 5.625% to 10.75% and maturities ranging from 2015 to 2018. For additional information with respect to the CEOC Notes, see “Business—Casino Properties and Development—CEOC Notes.”

Competitive Strengths

We anticipate that CAC and Growth Partners will have significant competitive advantages that differentiate them from their competition:

Opportunity for investors to get access to a growth-oriented gaming investment vehicle that is supported by Caesars Entertainment. We will be a growth-oriented company whose business is focused entirely on owning operating assets, equity and debt investments in the gaming and interactive entertainment industry. Investors will benefit from Caesars Entertainment’s scale and market leading position, in combination with its proprietary marketing technology and consumer loyalty programs, which will help Growth Partners’ businesses achieve operational efficiencies and support future growth opportunities.

 

 

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Simple capital structure and access to liquidity provide ability to support growth projects in new and expanding markets. Growth Partners’ simple and flexible capital structure provides it with the ability to invest in new casino projects in new and expanding markets quickly without the constraints of a more complex or levered capital structure. We believe that Growth Partners’ capital structure will provide greater access to the equity and debt markets for additional liquidity, which will position Growth Partners to capitalize on new growth opportunities. In addition, Growth Partners owns a portfolio of debt investments, from which it will receive meaningful current cash flows.

Potential access to future growth opportunities through the relationship with Caesars Entertainment. In connection with the Transactions, Growth Partners will enter into the CGP Operating Agreement with CAC and Caesars Entertainment and/or its subsidiaries, which will provide Growth Partners the ability to participate in new investment and acquisition opportunities developed by Caesars Entertainment, at the sole option of Caesars Entertainment to be determined by a committee of the board of directors of Caesars Entertainment comprised of disinterested directors. We believe that Caesars Entertainment’s brand portfolio and recognition, coupled with the power of the Total Rewards loyalty program, uniquely positions Caesars Entertainment to identify opportunistic acquisitions and developments. See “—Growth Partners” above for discussions of the arrangement among Caesars Entertainment and Growth Partners for identifying and considering new investment and acquisition opportunities.

Capitalize upon regulated online real money gaming in the United States by growing infrastructure and strategic relationships. CIE is currently operating its real money WSOP and Caesars-branded poker, bingo and casino online sites in the UK and has brand licensing agreements in Italy and France. Through these pursuits, CIE has developed meaningful strategic relationships with companies that have international experience in online real money gaming. As a result of its strategic partnership in the UK, CIE has an agreement with 888 to provide technology services for its real money gaming offerings in Nevada and New Jersey. Similarly, CIE has had an ongoing relationship with Groupe Lucien Barriere and Barriere Poker through WSOP Europe since 2011. Both relationships help to further increase CIE’s knowledge for building regulated online real money gaming operations in the United States.

Access to leading casino brands and a global network of casinos and the Total Rewards loyalty program. As of March 31, 2013, Caesars Entertainment owned, operated and managed 52 casinos that bear many of the most recognized brand names in the gaming industry. Planet Hollywood’s close proximity to other casino properties of, and operated by, Caesars Entertainment allows it to leverage the Caesars brands to attract customers to its casino and resort. Additionally, Planet Hollywood, Horseshoe Baltimore and CIE have or will have access to the Total Rewards loyalty program. We expect that any future development projects of Growth Partners will have access to the Total Rewards loyalty program. The Total Rewards loyalty program is considered to be one of the leading loyalty rewards programs in the casino entertainment industry. We believe that the Total Rewards loyalty program, along with other marketing tools, provide Planet Hollywood, Horseshoe Baltimore and CIE with a significant competitive advantage that enables them to efficiently market their products to a large and recurring customer base.

Highly scalable social and mobile games business model with rapid revenue growth and profitability. CIE’s revenue and profitability have grown rapidly and significantly. As CIE continues to leverage its existing franchises (including Slotomania, Bingo Blitz and World Series of Poker) and development pipeline, we anticipate that CIE’s revenue growth and EBITDA will accelerate due to its ability to utilize its live service game and development teams, which are largely based in low-cost production centers, and the design of CIE’s existing games, which generally require little modification across platforms.

Experienced senior management team in the social and mobile games, regulated online real money gaming and traditional land-based casino industries. The extensive experience of CIE’s senior management team positions CIE to take advantage of opportunities in the social and mobile games and regulated online real

 

 

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money gaming markets and to continue to develop the infrastructure needed to support online real money gaming as it becomes legalized and regulated in the United States. Mitch Garber, CEO of CAC and CIE, has worked in the gaming and interactive entertainment industry for over 20 years and most recently was CEO of PartyGaming plc (now bwin.party digital entertainment plc (“bwin.party”)), one of the largest online real money gaming companies in the world.

Planet Hollywood is, Horseshoe Baltimore will be, and we expect Growth Partners’ other land-based casinos will be, managed by subsidiaries of Caesars Entertainment, which has a senior management team, led by CEO Gary W. Loveman, with substantial experience and a proven track record.

Well-known, large casino entertainment facility on the Las Vegas Strip generating significant revenue and operating income. We believe the location of Planet Hollywood offers distinct advantages. Planet Hollywood is located on a 35-acre site on the east side of the Las Vegas Strip and sits among a contiguous strip of casinos owned by Caesars Entertainment. We believe Planet Hollywood’s prime location, adjoining facilities and accessibility enables it to attract a significant customer base and continue to capture growth in market share. For the year ended December 31, 2012, the Casino Properties and Developments segment generated net revenues of $303.7 million, net loss of $1.0 million and Adjusted Segment EBITDA of $69.1 million. For the three months ended March 31, 2013, the Casino Properties and Developments segment generated net revenues of $83.0 million, net income of $2.6 million and Adjusted Segment EBITDA of $21.9 million.

Ownership in development project in highly attractive new market. Growth Partners owns an interest in the Maryland Joint Venture, a high-potential conditionally licensed development project in Baltimore, Maryland. The Maryland Joint Venture represents a unique opportunity for Growth Partners to enter a new gaming market with attractive growth prospects. See “Business—Casino Properties and Developments—Horseshoe Baltimore, Maryland” for an overview of the gaming legislation passed by the Maryland General Assembly and the Maryland gaming market.

Business Strategy

Pursue opportunistic investment in development projects. We expect that Growth Partners’ simple and flexible capital structure will provide access to liquidity and low-cost of capital which will position Growth Partners to benefit from potential growth opportunities. As new markets become accessible across the United States and internationally, Growth Partners will deploy its capital to establish an initial foothold to gain and maintain an advantage in such markets as Growth Partners is doing in Maryland. Due to its complementary investment objectives and relationship with Caesars Entertainment, Growth Partners can also benefit from access to additional opportunities if Caesars Entertainment decides these opportunities are better suited for Growth Partners and declines to pursue the opportunity.

Develop, construct and successfully open the casino to be operated by the Maryland Joint Venture. Growth Partners intends to devote capital and resources, including its relationship with Caesars Entertainment, to the successful development and construction of Horseshoe Baltimore.

Continue to create and distribute compelling social and mobile casino-themed games to increase domestic and international presence. CIE’s management, as well as its creative and technical teams, appreciate that CIE’s core competency is casino-themed entertainment. In a short period of time, CIE has gained recognition in the online industry for its ability to create sophisticated and commercially successful social and mobile games, such as Slotomania. In December 2012, CIE acquired substantially all of the assets of Buffalo Studios, including the application Bingo Blitz, which is among the leading bingo games on Facebook, iOS and Android. In June 2013, CIE acquired the World Series of Poker social and mobile game assets and intellectual property from Electronic Arts. The World Series of Poker social and mobile game is available on the Facebook platform, on the Amazon

 

 

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Kindle, Android devices and all iOS devices. CIE regularly updates its games to encourage social interactions and add new content and features that encourage players to continue playing its games. In addition, CIE expects to continue to successfully leverage various technologies and standardized processes that are designed to enable rapid, timely, high-quality and cost-effective development of social and mobile games.

Ensure that CIE is well positioned to succeed in a regulated U.S. online real money gaming environment. CIE’s access to the globally recognized Caesars and WSOP brands and CIE’s dedicated online gaming management team position it to take advantage of opportunities in the U.S. and global online real money gaming markets and to continue to develop the infrastructure needed to launch in Nevada and New Jersey and additional states, if any, as they legalize online real money game. CIE will continue to use its online real money WSOP and Caesars-branded poker, bingo and casino online sites in the UK, its alliances with online gaming providers in Italy and France, and its relationships with 888 and Barrière Poker to further increase its knowledge for building its regulated online real money gaming operations in the U.S.

Capitalize on relationship with Caesars Entertainment. Growth Partners’ access to the industry-leading Total Rewards loyalty program, which includes over 45 million members as of March 31, 2013, improves the ability of its businesses to cross market and cross promote with Caesars Entertainment’s database and many of its casinos. This relationship will allow Planet Hollywood to utilize Caesars Entertainment’s sophisticated customer database and technology systems to efficiently and effectively manage its existing customer relationships. In addition, we believe CIE has a significant competitive advantage over its competitors due to CIE’s cross-marketing and trademark license agreement with Caesars Entertainment that allows CIE to distribute Caesars Entertainment’s brands online.

The Sponsors

Immediately upon the completion of this offering but prior to granting the Sponsor CAC Proxy, affiliates of the Sponsors will beneficially own at least approximately 42% of our outstanding Class A common stock (assuming that the subscription rights are exercised in full without the exercise of any over-subscription privilege by affiliates of the Sponsors). In addition, approximately     % of our Class A common stock (assuming the subscription rights are exercised in full by all holders of subscription rights) will be subject to the Sponsor CAC Proxy that gives Hamlet Holdings, an entity comprised of six persons that are leaders at the respective Sponsor, sole voting and dispositive power with respect to those shares of Class A common stock. Moreover, four of the seven directors of CAC are individuals affiliated with the Sponsors.

Apollo

Founded in 1990, Apollo is a leading global alternative investment manager with offices in New York, Los Angeles, Houston, London, Frankfurt, Luxembourg, Singapore, Hong Kong and Mumbai. As of March 31, 2013, Apollo had assets under management of approximately $114 billion in its private equity, credit and real estate businesses.

TPG

TPG is a leading global private investment firm founded in 1992 with approximately $56.7 billion of assets under management as of March 31, 2013 and offices in San Francisco, Fort Worth, Austin, Beijing, Chongqing, Hong Kong, London, Luxembourg, Melbourne, Moscow, Mumbai, New York, Paris, São Paulo, Shanghai, Singapore and Tokyo. TPG has extensive experience with global public and private investments executed through leveraged buyouts, recapitalizations, spinouts, growth investments, joint ventures and restructurings.

 

 

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Relationship with Caesars Entertainment

In connection with the Transactions, CAC and Growth Partners will enter into a management services agreement with Caesars Entertainment and certain of its subsidiaries (the “CGP Management Services Agreement”), pursuant to which Caesars Entertainment and certain of its subsidiaries will provide services to CAC and Growth Partners, including certain corporate services and back-office support and advisory and business management services, allowing CAC and Growth Partners to leverage Caesars Entertainment’s brands and capabilities. In addition, pursuant to the organizational documents of CAC and Growth Partners, Caesars Entertainment and/or certain of its subsidiaries will have certain rights including a call right for all or a portion of the issued and outstanding voting units of Growth Partners (or, at our election, shares of CAC’s Class A common stock) and a right of first offer for new business opportunities and for any contemplated asset sale by Growth Partners. See “Certain Relationships and Related Party Transactions—Agreements with Caesars Entertainment and its Subsidiaries—Limited Liability Company Agreement of CGP LLC” and “Description of Capital Stock” for details on the call rights. Growth Partners may only proceed with a new business opportunity if the disinterested members of Caesars Entertainment’s board of directors decline the opportunity for itself or CEOC and if Caesars Entertainment decides not to pursue and take such opportunity to a third party. See “Certain Relationships and Related Party Transactions.”

In exchange for the provision of the services under the CGP Management Services Agreement, CAC and/or Growth Partners will pay a service fee in an amount equal to the fully allocated cost of such services plus a margin of         % per annum. In addition, as partial consideration for the services provided under the CGP Management Services Agreement, Growth Partners will procure $             aggregate amount of CAC’s Class A common stock to be paid to Caesars Entertainment and its subsidiaries, which Caesars Entertainment and its subsidiaries may allocate to their employees and consultants in their discretion. The shares will be granted pursuant to CAC’s 2013 Performance Incentive Plan, as described under “Management—2013 Performance Incentive Plan.”

Caesars Entertainment is the world’s most diversified casino-entertainment provider and the most geographically diverse U.S. casino-entertainment company. As of March 31, 2013, Caesars Entertainment owned, operated and managed, through various subsidiaries, 52 casinos in 13 U.S. states and seven countries. The majority of these casinos operate in the United States and England and Caesars Entertainment uses the Total Rewards loyalty program to market promotions and to generate customer play across its network of properties in North America. As of the date hereof, approximately 70% of Caesars Entertainment’s common stock is beneficially owned by Hamlet Holdings.

The Transactions

CAC and Growth Partners were recently formed in connection with a number of transactions described below, including this offering, pursuant to which CAC, through its investment in Growth Partners, will acquire control of certain assets contributed by or purchased from subsidiaries of Caesars Entertainment and establish a number of service, management and other relationships between Growth Partners and Caesars Entertainment. See “Questions and Answers About the Company and the Rights Offering—Why is Caesars Entertainment conducting the rights offering?”

In connection with the distribution of the subscription rights, affiliates of the Sponsors have advised Caesars Entertainment that they intend to exercise subscription rights of at least $500.0 million, though they have not entered into any agreement to do so. Consummation of the Transactions is contingent on the exercise of subscription rights of at least $500.0 million by affiliates of the Sponsors. CAC will use the proceeds from this offering to acquire all of the voting interests in Growth Partners. Caesars Entertainment will contribute all of the shares of CIE’s outstanding common stock held by a subsidiary of Caesars Entertainment and approximately $1.1 billion in aggregate principal amount of the CEOC Notes that are owned by another subsidiary of Caesars

 

 

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Entertainment to Growth Partners in exchange for non-voting units, the quantum of which will be based on the combined ascribed value of $1.275 billion, subject to certain potential value-related adjustments at the closing of the Transactions. Of the $1.275 billion of combined ascribed value, $525 million is attributable to CIE (before the valuation adjustments discussed below) and approximately $750 million is attributable to the CEOC Notes, subject to adjustment as further described below. The value of the CEOC Notes was determined as of April 3, 2013 and reflects the 90-day average market trading value of the bonds with a liquidity discount and a discount for assumed transaction fees and expenses. Growth Partners will own approximately 89.2% of the outstanding shares of CIE’s common stock, which may be reduced to approximately 83.6% upon conversion of the $47.7 million convertible promissory note issued by CIE to Rock Gaming Interactive LLC (“Rock Gaming”) (subject to required regulatory approval), in each case not giving effect to any options or warrants that are exercisable. Assuming Rock Gaming exercises the convertible promissory note and after giving effect to other options, restricted stock and warrants that are exercisable, Growth Partners will own approximately 75% of CIE on a fully-diluted basis. See note 10 to the audited combined financial statements of Growth Partners included elsewhere in this prospectus for a description of the convertible notes issued to Rock Gaming. We refer to these transactions as the “Contribution Transaction” and these assets as the “Contributed Assets.” As a result of these asset contributions, Caesars Entertainment, through its subsidiaries, will own between an estimated 57% and 77% of the economic interests in CGP LLC, in each case, comprised of the value of the Contributed Assets and an additional 5%. The percentage owned will depend on the number of subscription rights exercised in the rights offering. This ownership range is also subject to adjustment at the closing of the Transactions due to the relative value of the contributed assets and certain other potential adjustments.

This agreed valuation is subject to potential increase by up to $225.0 million based on earnings from CIE’s social and mobile games business exceeding a specified amount in 2015, which would be conveyed to Caesars Entertainment or its subsidiaries in the form of additional non-voting units of CGP LLC or Class B common stock of CAC. If prior to the date that is nine months after the closing of the Transactions, Growth Partners sells or agrees to sell all of its interests in CIE (or any of its component parts) to any third party other than Caesars Entertainment, then Caesars Entertainment will receive concurrent with the closing of such sale, that number of additional non-voting units of CAC that would have been issued to Caesars Entertainment if the value of CIE (or any of its component parts) at the time of contribution to Growth Partners were increased by the difference between such third party sale price and the applicable valuation price of $525 million as it relates to CIE (or any of its component parts).

Additionally, Growth Partners intends to use $360.0 million of proceeds received from CAC to purchase from subsidiaries of Caesars Entertainment (i) Planet Hollywood, (ii) Caesars Entertainment’s joint venture interests in the Horseshoe Baltimore and (iii) a 50% interest in the management fee revenues for both of those properties. Of the $360.0 million proceeds to be used for the purchase, $280.0 million is attributable to the purchase of Planet Hollywood and the 50% interest in the management fee revenue for Planet Hollywood and the remaining $80.0 million is attributable to the purchase of Caesars Entertainment’s joint venture interests in the Horseshoe Baltimore and the 50% interest in the management fee revenue for the Horseshoe Baltimore. The purchase price for these assets is subject to adjustment based on Caesars Entertainment’s equity contribution to the Maryland Joint Venture prior to the closing of the offering. We refer to these transactions as the “Purchase Transaction” and these assets as the “Purchased Assets.” A subsidiary of Growth Partners will assume the $514.6 million of outstanding secured term loan related to Planet Hollywood (the “PHW Loan”) in connection with the Purchase Transaction. The purchase of Planet Hollywood and the assumption of the PHW Loan by Growth Partners are subject to the receipt of approval of lenders of the PHW Loan and any requirements the lenders may impose.

The Transactions will include certain value-related adjustments at closing, as follows.

 

   

Value of the CEOC Notes. The actual value of the CEOC Notes will be recalculated on the closing date of the Transactions using the 90 day trading average closing price for each tranche of the CEOC Notes for the period ended on the closing date of the Contribution Transaction, net of certain costs, commissions and discounts. The ownership percentages of Caesars Entertainment and CAC in CGP LLC will be recalculated accordingly.

 

 

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Return of the aggregate value of the rights. The aggregate value (the “rights value”), if any, of the CAC subscription rights that are distributed by Caesars Entertainment will be returned to Caesars Entertainment by CGP LLC in the form of additional non-voting units of CGP LLC or shares of Class B common stock of CAC with equivalent value to the rights value. The rights value shall be determined by an independent third-party valuation firm, which shall deliver an opinion immediately prior to the distribution of the subscription rights by Caesars Entertainment.

After the third anniversary of the closing of the Transactions, Caesars Entertainment will have the right, which it may assign to any of its affiliates or to any transferee of all non-voting units of CGP LLC held by Caesars Entertainment, to acquire all or a portion of the voting units of CGP LLC (or, at our option, shares of CAC’s Class A common stock) not otherwise owned by Caesars Entertainment and/or its subsidiaries at such time. On the eighth year and six month anniversary of the closing of the Transactions (unless otherwise agreed by Caesars Entertainment and CAC), if the board of directors of CAC has not previously exercised its liquidation right, Growth Partners shall, and the board of directors of CAC shall cause Growth Partners to, effect a liquidation. See “Certain Relationships and Related Party Transactions—Agreements with Caesars Entertainment and its Subsidiaries—Limited Liability Company Agreement of CGP LLC” and “Description of Capital Stock” for details on the call rights and liquidation rights. In addition, see “Risk Factors—Risks Related to Our Class A Common Stock— Caesars Entertainment’s call right on our Class A common stock may result in you being forced to sell our Class A common stock at a disadvantageous time and will cause you to own stock of Caesars Entertainment. This call right may not occur at all due to the discretion of Caesars Entertainment or the inability of Caesars Entertainment to achieve sufficient liquidity to exercise such right” and “Growth Partners will be required to be liquidated in eight years and six months, which may result in you receiving less than the full value of your Class A common stock” for a discussion of certain risks related to the call right and liquidation right.

In connection with the Purchase Transaction and the Contribution Transaction, CAC and Growth Partners will enter into agreements with Caesars Entertainment and its subsidiaries to provide certain corporate services and back-office support and advisory and business management services to CAC, Growth Partners and their subsidiaries. See “Certain Relationships and Related Party Transactions.” We refer to the Purchase Transaction, Contribution Transaction and the entering into such agreements collectively as the “Transactions.”

Closing

At the election of the Sponsors, in lieu of a single closing, the Transactions and the rights offering may close in multiple stages. Upon the receipt of the required regulatory approvals, (i) Caesars Entertainment will distribute the subscription rights to its stockholders as of the record date, (ii) CAC, Growth Partners and Caesars Entertainment and its subsidiaries will consummate the Contribution Transaction and (iii) affiliates of the Sponsors will use $500.0 million (the “Sponsor Commitment”) to purchase CAC’s Class A common stock at a price of $9.43 per whole share and CAC will use such proceeds to acquire voting units of CGP LLC. We refer to the foregoing steps as the “Initial Closing.” In connection with the Initial Closing, affiliates of the Sponsors will agree not to exercise their subscription rights upon expiration of the rights offering; provided, that affiliates of the Sponsors will be eligible to exercise their over-subscription privileges, if any.

On or after the Initial Closing, Growth Partners will use the proceeds to consummate the Purchase Transaction, subject to receipt of the required lenders’ approval (and any requirements the lenders may impose) with respect to the purchase of Planet Hollywood and regulatory approval with respect to the purchase of Caesars Entertainment’s joint venture interests in Horseshoe Baltimore. Prior to the consummation of the Purchase Transaction and the rights offering, Growth Partners will hold the proceeds from the Sponsor Commitment in escrow and will not otherwise invest or deploy such proceeds.

Upon expiration of the rights offering, holders of the subscription rights (other than affiliates of the Sponsors) may exercise their subscription rights to purchase CAC’s Class A common stock at a price of $9.43 per whole share. CAC will use the proceeds from the participating holders to acquire additional voting units of CGP LLC.

 

 

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Organizational Structure

The chart below depicts the organizational structure of Caesars Entertainment and related entities prior to the Transactions:

 

LOGO

 

(1) All shares held by funds affiliated with and controlled by the Sponsors and their co-investors, representing approximately 70% of Caesars Entertainment’s outstanding common stock, are subject to an irrevocable proxy that gives Hamlet Holdings, the members of which are comprised of three individuals affiliated with Apollo and two individuals affiliated with TPG, sole voting and sole dispositive power with respect to such shares.
(2) Consists of approximately $1.1 billion in aggregate principal amount of the CEOC Notes held by Harrah’s BC, Inc.
(3) Consists of the equity interests of PHW Las Vegas, LLC, which holds all of the assets and liabilities of Planet Hollywood, and PHW Manager, LLC, which manages Planet Hollywood. As of March 31, 2013, Planet Hollywood had a $514.6 million principal balance outstanding under the PHW Loan.
(4) Consists of 89.2% of the outstanding shares of CIE’s common stock, which would be reduced to approximately 83.6% of the outstanding shares of CIE’s common stock upon conversion by Rock Gaming of the convertible promissory note issued by CIE, in each case not giving effect to any options or warrants that are exercisable. As of March 31, 2013, CIE had $39.8 million of loans outstanding under its revolving credit facility with Caesars Entertainment.
(5) Owns approximately 58% equity interest in an entity that holds approximately 88% of the equity interests in CBAC Gaming, LLC equating to an effective 52% ownership of CBAC Gaming, LLC. Also holds all of the interest in the management fee revenue to be received by a subsidiary of CEOC in connection with the management of Horseshoe Baltimore.

 

 

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The chart below depicts our organizational structure following the consummation of this offering.

 

LOGO

 

(1) All shares held by funds affiliated with and controlled by the Sponsors and their participating co-investors, representing         % of CAC’s outstanding common stock (assuming the subscription rights are exercised in full by all holders of subscription rights), will be subject to an irrevocable proxy that gives Hamlet Holdings, the members of which are comprised of three individuals affiliated with Apollo and two individuals affiliated with TPG, sole voting and sole dispositive power with respect to such shares. As a result of the exercise of the subscription rights, and the applicability of the irrevocable proxy, Hamlet Holdings will control a majority of CAC’s outstanding common stock.
(2) Shares held by certain participating stockholders (other than affiliates of the Sponsors and their participating co-investors), representing         % of CAC’s outstanding Class A common stock (assuming the subscription rights are exercised in full by all holders of subscription rights), will be eligible for resale upon effectiveness of the registration statement of which this prospectus forms a part and will be listed on the NASDAQ Capital Market following this offering if we meet the NASDAQ Capital Market listing requirements.
(3) CAC will own         % of the total outstanding equity units in CGP LLC assuming the subscription rights are exercised in full by all holders of subscription rights.
(4) Caesars Entertainment, through two of its subsidiaries, HIE Holdings, Inc. and Harrah’s BC, Inc., collectively own 100% of CGP LLC’s outstanding non-voting units, representing         % of the economic interests in Growth Partners (assuming the subscription rights are exercised in full by all holders of subscription rights).
(5) Consists of approximately $1.1 billion in aggregate principal amount of the CEOC Notes.
(6) Consists of the equity interests of a subsidiary of PHW Las Vegas, LLC, which will hold all of the assets and liabilities of PHW Las Vegas, LLC, including Planet Hollywood, and a 50% interest in the management fee revenue received by PHW Manager, LLC in connection with the management of Planet Hollywood. As of March 31, 2013, Planet Hollywood had a $514.6 million principal balance outstanding under the PHW Loan.

 

 

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(7) Consists of 89.2% of the outstanding shares of CIE’s common stock, which would be reduced to approximately 83.6% of the outstanding shares of CIE’s common stock upon conversion by Rock Gaming of the convertible promissory note issued by CIE, in each case not giving effect to any options or warrants that are exercisable. As of March 31, 2013, CIE had $39.8 million of loans outstanding under its revolving credit facility with Caesars Entertainment.
(8) Owns approximately 58% equity interest in an entity that holds approximately 88% of the equity interests in CBAC Gaming, LLC equating to an effective 52% ownership of CBAC Gaming, LLC. Following the CVPR Sale, Growth Partners’ indirect ownership in CBAC Gaming, LLC will be approximately 41%. Also owns a 50% interest in the management fee revenue to be received by a subsidiary of CEOC in connection with the management of Horseshoe Baltimore. On July 2, 2013, CBAC Borrower, a subsidiary of CBAC Gaming, LLC, obtained the Baltimore Credit Facility that provides up to $310 million of project financing for the development of Horseshoe Baltimore and the Baltimore FF&E Facility that provides up to $30 million of equipment financing. As of July 2, 2013, $225.0 million of term B loans were funded and outstanding under the Baltimore Credit Facility.

Additional Information

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) because our total gross revenue was less than $1.0 billion for the fiscal year ended December 31, 2012, our most recently completed fiscal year. For further information on the implications of this distinction, see “Risk Factors—Risks Related to the Rights Offering.” Moreover, upon the closing of this offering, we will be a “controlled company” within the meaning of NASDAQ corporate governance standards because more than 50% of our voting common stock will continue to be beneficially owned by Hamlet Holdings after the granting of the Sponsor CAC Proxy. For further information on the implications of this distinction, see “Risk Factors—Risks Related to the Rights Offering” and “Management—Committees of Our Board of Directors.”

Our principal executive offices are located at One Caesars Palace Drive, Las Vegas, NV 89109, and our telephone number is (702) 407-6000. The address of our Internet site is                    . This Internet address is provided for informational purposes only and is not intended to function as a hyperlink. Accordingly, no information contained in this Internet address is included or incorporated by reference herein.

 

 

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The Rights Offering

The following summary describes the principal terms of the rights offering, but it is not intended to be a complete description of the offering. See “The Rights Offering” in this prospectus for a more detailed description of the terms and conditions of the distribution of rights and the offering of shares of Caesars Acquisition Company’s Class A common stock.

 

Securities Offered

Caesars Entertainment is distributing, at no charge, to holders of shares of Caesars Entertainment’s common stock as of the record date, non-transferable subscription rights to purchase up to an aggregate of 125,359,584 shares of CAC, at a price of $9.43 per whole share. Each holder of Caesars Entertainment’s common stock as of the record date will receive one subscription right for each full common share owned by that stockholder as of the record date. Each subscription right will entitle its holder to purchase from CAC one share of CAC’s Class A common stock. Each subscription right entitles the holder to a basic subscription right and an over-subscription privilege, as described below. The subscription rights will expire if they are not exercised by 5:00 p.m. New York City time, on                     , 2013. CAC expects the gross proceeds from the rights offering and the exercise of the subscription rights will be approximately $1,182.0 million, assuming that the subscription rights are exercised in full.

 

Basic Subscription Right

The basic subscription right gives holders of the subscription rights the right to purchase from CAC, in the aggregate, 125,359,584 shares of CAC’s Class A common stock at a subscription price of $9.43 per whole share. Caesars Entertainment has distributed to each stockholder of record on the record date one subscription right for every share of Caesars Entertainment’s common stock such stockholder owned at that time. Fractional shares or cash in lieu of fractional shares will not be issued in the rights offering. Instead, fractional shares resulting from the exercise of the basic subscription right will be eliminated by rounding up to the nearest whole share. Affiliates of the Sponsors have advised Caesars Entertainment that they intend to exercise subscription rights of at least $500.0 million, though they have not entered into any agreement to do so. Consummation of the Transactions is contingent on the exercise of subscription rights of at least $500.0 million by affiliates of the Sponsors.

 

Over-subscription Privilege

If you purchase all of the shares of CAC’s Class A common stock available to you pursuant to your basic subscription right, you may also choose to subscribe for a portion of any shares of CAC’s Class A common stock that other holders of subscription rights do not purchase through the exercise of their basic subscription rights. Over-subscription privileges will only be available with respect to shares of CAC’s Class A common stock underlying basic subscription rights that are not exercised or affirmatively retained by the holders of such basic subscription rights. If a holder of the basic subscription rights elects to retain any or all of its subscription rights that are not exercised, such holder must return a completed and signed rights certificate with the appropriate election to the Subscription Agent before the rights offering expires on             , 2013, at 5:00 p.m. New York City time. For the avoidance of doubt, a holder may not elect to retain more than the number of basic subscription rights actually issued to such holder.

 

 

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Affiliates and co-investors of the Sponsors are also eligible to exercise the over-subscription privilege. If co-investors of the Sponsors elect not to exercise any of their basic subscription rights, affiliates of the Sponsors, which control the co-invest vehicles, will cause the co-invest vehicles to retain the basic subscription rights not exercised by the co-investors. To the extent that shares of our Class A common stock are available pursuant to the over-subscription privilege, Hamlet Holdings, after the granting of the Sponsor CAC Proxy, may obtain a percentage beneficial ownership in our Class A common stock of greater than approximately     %.

 

Subscription Price

$9.43 per whole share. To be effective, any payment related to the exercise of a subscription right must be by cashier’s or certified check drawn upon a United States bank payable to the Subscription Agent at the address set forth below. Personal checks and wire transfers will not be accepted.

 

  In determining the subscription price, the board of directors of CAC considered, among other things, the valuation of the assets sold and contributed to Growth Partners. Neither CAC nor its board of directors retained a financial advisor in connection with the Transactions.

 

Evaluation of Assets Sold and Contributed to Growth Partners

The Valuation Committee appointed by the board of directors of Caesars Entertainment, or the “Valuation Committee,” engaged Evercore Group L.L.C., or “Evercore,” to act as a financial advisor in connection with the Transactions to provide valuation advice to the Valuation Committee. The board of directors of Caesars Entertainment engaged Evercore to provide certain opinions about the respective values of the assets sold and contributed to Growth Partners, the equity interests and other consideration received in consideration for the contribution of certain of such assets, and the fairness from a financial point of view to Caesars Entertainment of the total consideration to be received in consideration for the sale and contribution of such assets to Growth Partners.

 

Record Date

5:00 p.m., New York City time, on                     , 2013.

 

Expiration of the Rights Offering

5:00 p.m., New York City time, on                     , 2013, unless CAC extends the rights offering period. Rights not exercised by the expiration time will be void, of no value and will cease to be exercisable for shares of CAC’s common stock.

 

Use of Proceeds

Assuming the subscription rights are exercised in full, CAC expects to receive cash proceeds of approximately $1,182.0 million as a result of the sale of shares of CAC’s Class A common stock. CAC plans to use the gross proceeds of the sale of shares of its Class A common stock upon exercise of the rights to purchase voting units in CGP LLC. CAC plans to cause Growth Partners to use a portion of such proceeds to complete the Purchase Transaction and to reimburse Caesars Entertainment and CAC for fees and expenses incurred in connection with this offering and the remainder of such proceeds for general corporate purposes, including to make strategic investments. Caesars Entertainment will receive no direct proceeds from this offering. See “Use of Proceeds.”

 

 

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Share Ownership

As of the date hereof, approximately 70% of the common stock of Caesars Entertainment is beneficially owned by Hamlet Holdings, the members of which are comprised of three individuals affiliated with Apollo and two individuals affiliated with TPG, through an irrevocable proxy that gives Hamlet Holdings sole voting and sole dispositive power over such stock.

 

  Assuming the subscription rights are exercised in full and the Sponsor CAC Proxy is granted, Hamlet Holdings will beneficially own approximately     % of CAC’s Class A common stock as a result of the rights offering and the granting of the Sponsor CAC Proxy.

 

  Affiliates of the Sponsors have advised Caesars Entertainment that they intend to exercise subscription rights of at least $500.0 million, though they have not entered into any agreement to do so. Consummation of the Transactions is contingent on the exercise of subscription rights of at least $500.0 million by affiliates of the Sponsors. In addition, affiliates of the Sponsors may exercise their over-subscription privilege in full, such that they will purchase the maximum number of shares allocated to them under the over-subscription privilege. As a result, following the completion of the rights offering and the granting of the Sponsor CAC Proxy, we expect Hamlet Holdings will beneficially own at least         % of our Class A common stock.

 

Non-Transferability of Rights

The subscription rights may not be sold, transferred or assigned and will not be quoted on any stock exchange or market. See “The Rights Offering—Non-Transferability of Subscription Rights.”

 

No Revocation

All exercises of subscription rights are irrevocable, even if you later learn of information that you consider to be unfavorable to the exercise of your subscription rights. However, exercises of subscription rights will be revocable if there is a fundamental change to the terms of this offering and the related transactions. You should not exercise your subscription rights unless you are certain that you wish to purchase shares of CAC’s Class A common stock at a price of $9.43 per whole share. See “Risk Factors—Risks Related to the Rights Offering—You may not revoke your exercise of the subscription rights and you could be committed to buying shares at a price above the prevailing market price after completion of the rights offering.”

 

Rights Offering Conditions

Caesars Entertainment’s obligation to commence the rights offering and CAC’s obligation to distribute the shares of CAC’s Class A common stock subscribed for in the rights offering and to close the Transactions is conditioned upon the satisfaction or waiver by Caesars Entertainment or CAC, as applicable, of the following conditions:

 

   

Caesars Entertainment’s board of directors shall have authorized and approved the Transactions and not withdrawn such authorization and approval, and shall have declared the dividend of the subscription rights to Caesars Entertainment’s stockholders;

 

 

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each of the agreements entered into between Caesars Entertainment and certain of its subsidiaries, CAC and Growth Partners governing the Transactions shall have been executed by each party thereto and all actions required to be performed prior to the closing of the rights offering shall have been completed;

 

   

the exercise of subscription rights of at least $500.0 million by affiliates of the Sponsors;

 

   

the receipt of required regulatory approvals from applicable gaming and other regulatory authorities;

 

   

the receipt of required lenders’ approval (and any requirements the lenders may impose) with respect to the purchase of Planet Hollywood;

 

   

the Securities and Exchange Commission, or the “SEC,” shall have declared effective our Registration Statement on Form S-1, of which this prospectus forms a part, under the Securities Act of 1933, as amended, or the “Securities Act,” and no stop order suspending the effectiveness of the Registration Statement shall be in effect, and no proceedings for such purpose shall be pending before or threatened by the SEC;

 

   

no order, injunction or decree issued by any governmental authority of competent jurisdiction or other legal restraint or prohibition preventing consummation of the Transactions shall be in effect, and no other event outside the control of Caesars Entertainment shall have occurred or failed to occur that prevents the consummation of the Transactions;

 

   

the individuals listed as members of our post-Transactions board of directors in this prospectus shall have been duly elected; and

 

   

our amended and restated certificate of incorporation (the “Certificate of Incorporation”) and amended and restated bylaws (the “Bylaws”), each in substantially the form filed as an exhibit to the Registration Statement of which this prospectus forms a part, shall be in effect.

 

  In the event Caesars Entertainment does not receive the required lenders’ approval with respect to the purchase of Planet Hollywood by Growth Partners and the related assumption of the PHW Loan, the Transactions may not close. Alternatively, the Transactions may be altered to not include Planet Hollywood.

 

  The fulfillment or waiver of the foregoing conditions will not create any obligation on the part of CAC to close the rights offering. In addition, CAC reserves the right to withdraw and cancel the rights offering if, at any time prior to its expiration, the board of directors of CAC determines, in its sole discretion, not to proceed with the Transactions on the terms contemplated and as described under “Certain Relationships and Related Party Transactions—Transaction Agreement.” See “The Rights Offering—Conditions, Withdrawal and Cancellation.”

 

 

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Material U.S. Federal Income Tax Considerations

Although the treatment of the receipt, exercise, expiration and cancellation of the subscription rights for U.S. federal income tax purposes is not entirely clear:

 

   

A stockholder that receives a subscription right should expect to have taxable dividend income equal to the fair market value (if any) of the subscription right on the date of its distribution;

 

   

A stockholder that allows a subscription right to expire without exercising it should expect to have short-term capital loss upon the expiration of such right in an amount equal to such stockholder’s tax basis (if any) in such right.

 

  Because a short-term capital loss generally cannot be used to offset taxable dividend income, you may owe tax as a result of the receipt of a subscription right from Caesars Entertainment even if you take no action. You may need to fund any such tax with cash from other sources.

 

  In certain circumstances, withholding tax or backup withholding tax may apply to the distribution by Caesars Entertainment of the subscription rights. If withholding tax or backup withholding tax applies to the distribution of the subscription rights to a stockholder, Caesars Entertainment, the stockholder’s broker (or other applicable withholding agent) will be required to remit any such withholding tax or backup withholding tax in cash to the Internal Revenue Service. Depending on the circumstances, Caesars Entertainment, the broker (or other applicable withholding agent) may obtain the funds necessary to remit any such withholding tax by asking the stockholder to provide the funds or by using funds in the stockholder’s account with the broker. CAC shall reimburse Caesars Entertainment for any amounts paid by Caesars Entertainment with respect to withholding obligations on the distribution of the subscription rights.

 

  For a detailed discussion of the material U.S. federal income tax considerations relating to the receipt, exercise, expiration and cancellation of the subscription rights, see “Material U.S. Federal Income Tax Considerations.” Stockholders should consult their own tax advisors regarding the U.S. federal, state and local and non-U.S. income, estate and other tax considerations relating to the receipt, exercise, expiration and cancellation of the subscription rights in light of their particular circumstances.

 

Extension and Cancellation

The rights offering is subject to the satisfaction or waiver by Caesars Entertainment or CAC, if applicable, of certain conditions. In addition, CAC has the right to withdraw and cancel the rights offering if, at any time prior to its expiration, the board of directors of CAC determines, in its sole discretion, not to proceed with the Transactions on the terms contemplated and as described under “Certain Relationships and Related Party Transactions—Transaction Agreement.”

 

 

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  If CAC cancels the rights offering, due to the lack of satisfaction or the waiver of one or more conditions to the rights offering or otherwise, the subscription rights will be void, of no value and will cease to be exercisable for shares of CAC’s Class A common stock and any money received from subscribing stockholders will be returned, without interest or penalty, as soon as practicable following the cancellation of the rights offering. CAC may also extend the rights offering for additional periods.

 

Procedures for Exercising Subscription Rights

To exercise your subscription rights, you must take the following steps:

 

   

If you are a registered holder of Caesars Entertainment’s common stock and you wish to participate in the rights offering, you must deliver payment and a properly completed and duly executed rights certificate to the Subscription Agent to be received before 5:00 p.m., New York City time, on                     , 2013. In certain cases, you may be required to provide additional documentation if you are signing a rights certificate as a fiduciary or representative. Promptly after the date of this prospectus, the Subscription Agent will send a rights certificate to each registered holder of Caesars Entertainment’s common stock as of the close of business on the record date, based on the stockholder registry maintained at the transfer agent for Caesars Entertainment’s common stock. You may deliver the documents and payments by hand delivery, first class mail or courier service. If you use first class mail for this purpose, we recommend using registered mail, properly insured, with return receipt requested.

 

   

If you are a beneficial owner of shares of Caesars Entertainment’s common stock that are registered in the name of a broker, dealer, custodian bank or other nominee, or if you would rather have an institution conduct the transaction on your behalf, you should instruct your broker, dealer, custodian bank or other nominee to exercise your subscription rights on your behalf. Although you will not receive a rights certificate, the Depository Trust Company, or “DTC,” will electronically issue one subscription right to your nominee record holder for every share of Caesars Entertainment’s common stock that you beneficially own as of the record date. Please follow the instructions of your nominee, who may require that you meet a deadline earlier than 5:00 p.m., New York City time, on                     , 2013.

 

 

Reason for Rights Offering Structure

Caesars Entertainment is conducting a rights offering for CAC because it believes it will provide the funds necessary for CAC to acquire the voting units of CGP LLC and thereby, indirect beneficial ownership of CIE and Planet Hollywood and an interest in the Maryland Joint Venture. In addition, Caesars Entertainment believes that the rights offering will benefit its stockholders by giving them

 

 

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access to a growth-oriented investment vehicle and the ability to obtain an ownership in Growth Partners, a company with a simple and flexible capital structure that will provide a competitive advantage in the pursuit of high return, capital intensive investment opportunities in land-based casino gaming, regulated online real-money gaming, and social and mobile games.

 

  Because the subscription rights are being distributed, at no charge, to Caesars Entertainment’s existing stockholders, stockholders will have the choice to own shares in both companies or in either company separately.

 

Shares Outstanding Before the Rights Offering

No shares of our Class A common stock will be outstanding prior to the completion of the rights offering.

 

Shares Outstanding After Completion of the Rights Offering

We will issue 125,359,584 shares of our Class A common stock as a result of the rights offering if the subscription rights are fully exercised and we do not otherwise cancel the rights offering. Assuming a full exercise of the subscription rights, 125,359,584 shares of our Class A common stock will be outstanding after completion of the rights offering.

 

Fees and Expenses

Caesars Entertainment is not charging any fee or sales commission to distribute subscription rights to you or for the delivery of shares of CAC’s Class A common stock to you if you exercise your subscription rights. If you exercise your subscription rights through your broker, dealer, custodian bank or other nominee, you are responsible for paying any fees such intermediary may charge you.

 

  Growth Partners will use a portion of the net proceeds from this offering to reimburse Caesars Entertainment and CAC for fees and expenses incurred in connection with this offering.

 

Trading Market and Symbol

We intend to apply to list shares of our Class A common stock for trading on the NASDAQ Capital Market under the symbol “CGP”; however, we cannot assure you that we will achieve a listing upon completion of this offering or thereafter. See “Risk Factors—Risks Related to Our Class A Common Stock—An active trading market for our Class A common stock may not develop.”

 

Relationship with Caesars Entertainment After the Rights Offering

In connection with the Transactions, we and Growth Partners will enter into various agreements with Caesars Entertainment and certain of its subsidiaries which, among other things, (1) govern the Transactions and certain aspects of Growth Partners’ relationship with us and Caesars Entertainment and (2) establish terms under which Caesars Entertainment and its subsidiaries will provide us and Growth Partners with (i) certain corporate shared services and back-office support and (ii) advisory and business management services.

 

 

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Although a number of these agreements will be executed prior to the distribution of the subscription rights, the effectiveness of the agreements is conditioned upon the consummation of the rights offering. We describe these arrangements in greater detail under “Certain Relationships and Related Party Transactions—Agreements with Caesars Entertainment and its Subsidiaries” and describe some of the risks of these arrangements under “Risk Factors—Risks Related to Growth Partners’ Continued Dependence on Caesars Entertainment and the Transactions.”

 

No Board Recommendation Regarding Exercise of Subscription Rights

Neither Caesars Entertainment’s nor CAC’s board of directors is making any recommendation regarding whether exercise of the subscription rights or the over-subscription privilege is or is not in your best interests. Stockholders who exercise subscription rights will incur investment risk on new money invested. Neither Caesars Entertainment nor CAC can predict the price at which shares of CAC’s Class A common stock will trade after the completion of the rights offering. The market price for CAC’s Class A common stock may decrease to an amount below the subscription price, and if you purchase shares of common stock at the subscription price, you may not be able to sell the shares in the future at the same price or a higher price. In addition, we intend to apply to list shares of our Class A common stock for trading on the NASDAQ Capital Market; however, there can be no assurances that we will achieve a listing upon completion of this offering or thereafter. You should make your decision based on your assessment of CAC’s business and financial condition, its prospects for the future, the terms of the rights offering and the information contained in this prospectus. See “Risk Factors—Risks Related to Our Class A Common Stock” for a discussion of some of the risks involved in investing in our Class A common stock.

 

  As of the date hereof, approximately 70% of the common stock of Caesars Entertainment is beneficially owned by Hamlet Holdings through an irrevocable proxy that gives Hamlet Holdings sole voting and sole dispositive power over such stock. Caesars Entertainment is, and CAC will be, with the grant of the Sponsor CAC Proxy after completion of the rights offering, controlled by Hamlet Holdings. You should not view the intentions of the affiliates of the Sponsors as a recommendation or other indication, by them or any member of Caesars Entertainment’s or CAC’s board of directors, regarding whether the exercise of the subscription rights is or is not in your best interests.

 

Risk Factors

Before you exercise your subscription rights to purchase shares of CAC’s Class A common stock, you should carefully consider the risks described in the section entitled “Risk Factors,” beginning on page 41 of this prospectus.

 

Transfer Agent and Registrar

The transfer agent and registrar for our Class A common stock will be Computershare Trust Company, N.A., Canton, Massachusetts.

 

 

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Solicitation Agent

Subscription Agent

 

Information Agent

                    . If you have questions about the rights offering or need additional copies of the rights offering documents, please contact                     , our Information Agent, by calling (            )         -         (toll-free), or, if you are a bank, broker or other nominee, (            )         -         (toll-free).

 

 

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SUMMARY HISTORICAL AND PRO FORMA CONDENSED FINANCIAL DATA OF CAESARS ACQUISITION COMPANY AND

SUMMARY HISTORICAL COMBINED CONDENSED FINANCIAL DATA OF GROWTH PARTNERS

The following table presents our summary of the historical condensed financial data of CAC upon its date of incorporation and unaudited pro forma condensed financial data for CAC as of March 31, 2013 and for the fiscal years ended December 31, 2012 and 2011 and the quarters ended March 31, 2013 and 2012. The unaudited pro forma condensed financial data has been developed by applying pro forma adjustments, including the issuance of the subscription rights and the accounting for the historical audited combined financial statements of the historical combined financial statements of the entities and assets that will be contributed to or purchased by Growth Partners under the equity method. Due to the variability in outcomes arising from different possible levels of actual exercises of the subscription in CAC’s Class A common stock, pro forma financial data depicting the minimum expected exercised subscription in shares of CAC’s Class A common stock along with separate pro forma data depicting the maximum expected exercised subscription in shares of CAC’s Class A common stock has been prepared in order to reflect the range of possible results. Specifically, if only affiliates of the Sponsors were to exercise their subscription rights, CAC would receive approximately $500.0 million in gross proceeds, which would be used to purchase the voting units of CGP LLC, representing approximately 23.2% of the total outstanding equity units of CGP LLC (the “minimum” scenario). If all of the holders of subscription rights were to exercise their rights, CAC would receive approximately $1,182.0 million in gross proceeds, which would be used to purchase the voting units of CGP LLC, representing approximately 43.1% of the total outstanding equity units of CGP LLC (the “maximum” scenario).

The pro forma adjustments are based upon available information and certain assumptions that are factually supportable and that we believe to be reasonable. The summary unaudited pro forma condensed financial data is included for informational purposes only and does not purport to reflect our results of operations or financial position that would have occurred had the Transactions or the accounting for our investment in Growth Partners under the equity method occurred on the dates assumed, and it therefore should not be relied upon as being indicative of our results of operations or financial position had these Transactions occurred on such dates.

Upon the completion of the Transactions, CAC’s sole material asset will be its interest in Growth Partners, which will be accounted for using the equity method. As a result, we believe the financial statements of Growth Partners itself will be relevant to the investor because these statements present the financial position and results of our underlying operations in greater detail. For accounting purposes, the historical financial statements of Growth Partners are the combined financial statements of CAC’s predecessor. These combined financial statements have been prepared on a stand-alone basis and, as the Transactions are considered a transaction between entities under common control, have been derived from the historical accounting records and consolidated financial statements of Caesars Entertainment. The combined historical financial statements consist of the financial positions, results of operations and cash flows of the businesses and assets to be contributed to or acquired by Growth Partners in the Transactions described previously as if those businesses were combined into a reporting entity for all periods presented.

 

 

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The historical and unaudited pro forma condensed financial data should be read in conjunction with “Unaudited Pro Forma Condensed Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited financial statements of CAC and Growth Partners and the related notes included elsewhere in this prospectus.

 

    Caesars Acquisition Company  
    Minimum
Subscription
Funding
Pro forma
for the
Year Ended
December 31
    Maximum
Subscription
Funding
Pro forma
for the
Year Ended
December 31
    Minimum
Subscription
Funding
Pro forma
for the
Quarter Ended
March 31
    Maximum
Subscription
Funding
Pro forma
for the
Quarter Ended
March 31
 
(in millions)   2012     2011     2012     2011     2013     2012     2013     2012  

Consolidated Statement of Operations

               

Revenues

  $ —        $ —        $ —        $ —        $ —        $ —        $ —        $ —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

    —          —          —          —          —          —          —          —     

Income from equity method investment in Growth Partners

    41.8        37.8        41.8        37.8        11.5        10.4        11.5        10.4   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

    41.8        37.8        41.8        37.8        11.5        10.4        11.5        10.4   

Provisions for income taxes

    (15.0     (13.2     (15.0     (13.2     (4.0     (3.8     (4.0     (3.8
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 26.8      $ 24.6      $ 26.8      $ 24.6      $ 7.5      $ 6.6      $ 7.5      $ 6.6   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share (basic and diluted)

  $ 0.51      $ 0.46      $ 0.21      $ 0.20      $ 0.14      $ 0.12      $ 0.06      $ 0.05   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding (basic and diluted)

    52,990,608        52,990,608        125,359,584        125,359,584        52,990,608        52,990,608        125,359,584        125,359,584   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance Sheet Data (at period end)

               

Cash and cash equivalents

          $ —          $ —       

Working
capital (a)

          $ —          $ —       

Total assets

          $ 500.0        $ 1,182.0     

Total debt (b)

          $ —          $ —       

 

(a) Working capital is the excess of current assets over current liabilities.
(b) Total debt is comprised of long-term debt, debt to related party and convertible notes issued to related party.

 

 

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     Growth Partners  
     For the Year Ended
December 31,
    For the Quarter Ended
March 31,
 
(in millions)        2012             2011             2013             2012      
                 (unaudited)  

Consolidated Statement of Operations

        

Revenues

        

Interactive Entertainment

   $ 207.7      $ 66.5      $ 68.6      $ 43.3   

Casino Properties and Developments

     303.7        306.2        83.0        76.5   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net revenues

     511.4        372.7        151.6        119.8   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

        

Interactive Entertainment—Direct

     62.6        16.3        21.1        13.6   

Casino Properties and Development—Direct

     139.1        136.6        35.7        34.3   

Property, general, administrative and other

     189.0        128.3        56.8        39.4   

Depreciation and amortization

     32.2        29.6        10.4        8.1   

Change in fair value of contingent consideration

     —          —          52.4        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     422.9        310.8        176.4        95.4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income/(loss) from operations

     88.5        61.9        (24.8     24.4   

Interest expense, net of interest capitalized

     (41.7     (39.9     (10.1     (11.3

Loss on early extinguishment of debt

     —          (2.6     —          —     

Interest income—related party

     145.1        123.7        40.6        34.0   

Other income, net

     1.9        0.1        0.2        0.4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     193.8        143.2        5.9        47.5   

(Provision)/benefit from income taxes

     (66.4     (50.7     (1.7     (15.8
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     127.4        92.5        4.2        31.7   

Less: net (income)/loss attributable to non-controlling interests

     (0.6     (8.0     2.1        (0.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Growth Partners

   $ 126.8      $ 84.5      $ 6.3      $ 31.3   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other Financial Data

        

Adjusted Segment EBITDA (1)

        

Interactive Entertainment

   $ 76.2      $ 27.8      $ 20.6      $ 16.8   

Casino Properties and Developments

     69.1        74.5        21.9        18.4   
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 145.3      $ 102.3      $ 42.5      $ 35.2   
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance Sheet Data (at period end)

        

Cash and cash equivalents

   $ 155.6      $ 110.1      $ 144.2     

Working capital (a)

   $ 120.9      $ 84.9      $ 81.0     

Total assets

   $ 1,738.9      $ 1,380.9      $ 1,865.9     

Total debt (b)

   $ 554.3      $ 585.3      $ 552.1     

(1) Adjusted Segment EBITDA

        

Interactive Entertainment

   $ 76.2      $ 27.8      $ 20.6      $ 16.8   

Casino Properties and Development

     69.1        74.5        21.9        18.4   
  

 

 

   

 

 

   

 

 

   

 

 

 
     145.3        102.3        42.5        35.2   

Reconciliation

        

Stock-based compensation (c)

     (11.4     (10.9     (2.5     (2.6

Lobbying expense (d)

     (3.6     (2.9     (0.3     (0.5

Acquisition and integration costs (e)

     (4.1     (0.9     —          (0.1

Fair value of contingent consideration (f)

     —          —          (52.4     —     

Gains resulting from legal settlements (g)

     —          2.9        —          —     

Write-downs, reserves, recoveries and project opening costs (h)

     (5.5     1.0        (1.7     0.5   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     120.7        91.5        (14.4     32.5   

Depreciation and amortization

     (32.2     (29.6     (10.4     (8.1

Interest expense, net of interest capitalized

     (41.7     (39.9     (10.1     (11.3

Loss on early extinguishment of debt

     —          (2.6     —          —     

Interest income—related party

     145.1        123.7        40.6        34.0   

Other income, net

     1.9        0.1        0.2        0.4   

Provision from income taxes

     (66.4     (50.7     (1.7     (15.8
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 127.4      $ 92.5      $ 4.2      $ 31.7   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

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(a) Working capital is the excess of current assets over current liabilities.
(b) Total debt is comprised of long-term debt, debt to related party and convertible notes issued to related party.
(c) Amounts represent non-cash stock-based compensation expense.
(d) Amounts represent expenses incurred in the Interactive Entertainment segment in connection with active participation in lobbying efforts for the approval of online poker and the finalization of the supporting internet gaming regulations, primarily in the United States.
(e) Amounts include certain one-time costs incurred by the Interactive Entertainment segment associated with the 2012 acquisition of substantially all of the assets of Buffalo Studios and the 2011 acquisition of Playtika.
(f) This amount represents the change in fair value of contingent consideration for the acquisition of Buffalo Studios.
(g) Amount represents a settlement the Interactive Entertainment segment received as a plaintiff in a legal matter.
(h) For the year ended 2012 and quarter ended March 31, 2013, the amounts primarily represents development costs incurred in connection with the Maryland Joint Venture. For the year ended 2011 the amount primarily represents a legal settlement recorded by the Planet Hollywood property in a case for which Planet Hollywood was the plaintiff. For the quarter ended March 31, 2012, the amount primarily represents income earned under an agreement with a time share partner, which expired in March 2012.

 

 

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QUESTIONS AND ANSWERS ABOUT THE COMPANY AND THE RIGHTS OFFERING

Set forth below are examples of what we anticipate will be commonly asked questions about the rights offering and the transactions contemplated thereby. The answers are based on selected information included elsewhere in this prospectus. The following questions and answers do not contain all of the information that may be important to you and may not address all of the questions that you may have about the rights offering. This prospectus contains more detailed descriptions of the terms and conditions of the rights offering and provides additional information about us and our business, including potential risks related to the rights offering, shares of our Class A common stock and our business.

Exercising the rights and investing in our Class A common stock involves a high degree of risk. We urge you to carefully read the section entitled “Risk Factors” beginning on page 41 of this prospectus, and all other information in this prospectus in its entirety before you decide whether to exercise your rights.

What is the rights offering?

Caesars Entertainment is distributing, at no charge, to holders of shares of Caesars Entertainment’s common stock as of the record date, non-transferable subscription rights to purchase shares of CAC’s Class A common stock from CAC. Caesars Entertainment is distributing to each holder of its common stock as of the record date, one subscription right for each full common share owned by that stockholder as of the record date. Each subscription right will entitle its holder to purchase from CAC one share of CAC’s Class A common stock. Each subscription right entitles the holder to a basic subscription right and an over-subscription privilege, as described below. We intend to apply to list shares of our Class A common stock for trading on the NASDAQ Capital Market under the symbol “CGP”; however, we cannot assure you that we will achieve a listing upon completion of this offering or thereafter. See “Risk Factors—Risks Related to Our Class A Common Stock—An active trading market for our Class A common stock may not develop.”

What is CAC, or “CGP”?

CAC was formed to make an equity investment in Growth Partners, a joint venture between CAC and Caesars Entertainment, the world’s most diversified casino-entertainment provider and the most geographically diverse U.S. casino-entertainment company. CAC does not own any assets or have any direct operations. Upon consummation of the Transactions, CAC will serve as CGP LLC’s managing member and sole holder of all of its outstanding voting units, and Caesars Entertainment and certain of its subsidiaries will hold all of CGP LLC’s outstanding non-voting units.

Growth Partners is a casino asset and entertainment company focused on acquiring and developing a portfolio of operating assets and equity investments in the gaming and interactive entertainment industry. Upon consummation of the Transactions, Caesars Entertainment and certain of its subsidiaries will own all of the outstanding non-voting units of CGP LLC and will be the majority economic shareholder of CGP LLC, and therefore will have a large direct stake in Growth Partners’ financial performance and growth potential. Through its two businesses—Interactive Entertainment and Casino Properties and Developments – Growth Partners will focus on developing or acquiring assets with strong value creation potential and leveraging interactive technology with well-known online brands. Growth Partners’ Interactive Entertainment business consists of CIE. Growth Partners’ Casino Properties and Developments business is expected to initially consist of the Planet Hollywood and an interest in the Horseshoe Baltimore in Maryland, an early stage high-potential development project.

Assuming the rights offering is subscribed in full by all holders of subscription rights and the Sponsor CAC Proxy is granted, we anticipate that immediately following the consummation of the Transactions, Hamlet Holdings will beneficially own at least     % of our outstanding Class A common stock. Affiliates of the Sponsors, through granting the Sponsor CAC Proxy, may increase Hamlet Holdings’ percentage beneficial ownership of CAC through their exercise of the over-subscription privilege, through open market purchases of

 

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CAC’s Class A common stock or otherwise. As a result of Hamlet Holdings beneficially owning more than 50% of our Class A common stock, we will qualify as and, if listed, elect to be a “controlled company” under the NASDAQ Marketplace rules following the completion of the rights offering and the listing of our Class A common stock, if any. As a result, we currently intend to rely on exemptions from certain corporate governance requirements otherwise applicable to NASDAQ-listed companies.

In connection with the Transactions, we and Growth Partners will enter into various agreements with Caesars Entertainment and certain of its subsidiaries, which, among other things, (1) govern the Transactions and certain aspects of Growth Partners’ relationship with us and Caesars Entertainment and (2) establish terms under which Caesars Entertainment and its subsidiaries will provide us with (i) certain corporate shared services and back-office support and (ii) advisory and business management services. Although these agreements will be executed prior to the distribution of the subscription rights, the effectiveness of the agreements is conditioned upon the consummation of the rights offering. For more information regarding the agreements between Growth Partners and Caesars Entertainment, see “Certain Relationships and Related Party Transactions—Agreements with Caesars Entertainment and its Subsidiaries.”

What is the basic subscription right?

Holders of the basic subscription rights will have the opportunity to purchase from CAC, in the aggregate, 125,359,584 shares of CAC’s Class A common stock at a subscription price of $9.43 per whole share. Caesars Entertainment has granted to you, as a stockholder of record on the record date, one subscription right for every share of Caesars Entertainment’s common stock you owned at that time. Fractional shares or cash in lieu of fractional shares will not be issued in the rights offering. Instead, fractional shares resulting from the exercise of the basic subscription right will be eliminated by rounding up to the nearest whole share.

We determined the number of rights required to purchase one share of CAC’s Class A common stock by dividing the number of shares of Caesars Entertainment’s common stock outstanding on the record date by the number of shares of CAC’s Class A common stock which are to be sold by CAC pursuant to the rights offering. Accordingly, each subscription right allows the holder thereof to subscribe for one share of CAC’s Class A common stock at the cash price of $9.43 per whole share. As an example, if you owned 1,000 shares of Caesars Entertainment’s common stock on the record date, you would receive 1,000 subscription rights pursuant to your basic subscription right that would entitle you to purchase 1,000 shares of our Class A common stock at a subscription price of $9.43 per whole share. Caesars Entertainment determined the subscription price of $9.43 by dividing $1,182.0 million, which is the aggregate exercise price for the rights offering as approved by Caesars Entertainment’s board of directors in connection with the Transactions, by the total number of shares of our Class A common stock to be issued in the offering. See “—How was the $9.43 per share subscription price determined?”

You may exercise all or a portion of your basic subscription right, or you may choose not to exercise any subscription rights at all. However, if you exercise less than your full basic subscription right, you will not be entitled to purchase shares of Class A common stock pursuant to the over-subscription privilege.

If you are a registered holder of Caesars Entertainment’s common stock, the number of shares of Class A common stock you may purchase pursuant to your basic subscription right will be indicated on the rights certificate that you receive.

If you hold your shares in the name of a broker, dealer, custodian bank or other nominee who uses the services of DTC, you will not receive a rights certificate. Instead, DTC will electronically issue one subscription right to your nominee record holder for every share of Caesars Entertainment’s common stock that you own as of the record date. If you are not contacted by your nominee, you should contact your nominee as soon as possible.

 

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What is the over-subscription privilege and how will shares of Class A common stock be allocated in the rights offering?

If you purchase all shares of CAC’s Class A common stock available to you pursuant to your basic subscription rights, you may also choose to purchase a portion of any shares of Class A common stock that other holders of subscription rights do not purchase through the exercise of their basic subscription rights. Over-subscription privileges will only be available with respect to shares of CAC’s Class A common stock underlying basic subscription rights that are not exercised or affirmatively retained by the holders of such basic subscription rights. If a holder of the basic subscription rights elects to retain any or all of its subscription rights that are not exercised, such holder must return a completed and signed rights certificate with the appropriate election to the Subscription Agent before the rights offering expires on             , 2013, at 5:00 p.m. New York City time. For the avoidance of doubt, a holder may not elect to retain more than the number of basic subscription rights actually issued to such holder. Affiliates and co-investors of the Sponsors are also eligible to exercise the oversubscription privilege. If co-investors of the Sponsors elect not to exercise any of their basic subscription rights, affiliates of the Sponsors, which control the co-invest vehicles, will cause the co-invest vehicles to retain the basic subscription rights not exercised by the co-investors.

Only holders who fully exercise all of their basic subscription rights may participate in the over-subscription privilege. If you wish to exercise your over-subscription privilege, you must indicate on your rights certificate, or the form provided by your nominee if your shares are held in the name of a nominee, how many additional shares of Class A common stock you would like to purchase pursuant to your over-subscription privilege, and provide payment as described below.

Shares of our Class A common stock will be allocated in the rights offering as follows:

 

   

First, shares will be allocated to holders of rights who exercise their basic subscription rights at a ratio of one share of Class A common stock per exercised subscription right.

 

   

Second, any remaining shares that were eligible to be purchased in the rights offering will be allocated among the holders of rights who exercise the over-subscription privilege, in accordance with the following formula:

Each holder who exercises the over-subscription privilege will be allocated a percentage of the remaining shares equal to the percentage that results from dividing (i) the number of basic subscription rights which that holder exercised by (ii) the number of basic subscription rights which all holders who wish to participate in the over-subscription privilege exercised. Such percentage could result in the allocation of more or fewer over-subscription shares than the holder requested to purchase through the exercise of the over-subscription privilege.

For example, if Stockholder A holds 200 subscription rights and Stockholder B holds 300 subscription rights and they are the only two stockholders who exercise the over-subscription privilege, Stockholder A will be allocated 40% and Stockholder B will be allocated 60% of all remaining shares available. (Example A)

 

   

Third, if the allocation of remaining shares pursuant to the formula described above in the second step would result in any holder receiving a greater number of shares of Class A common stock than that holder subscribed for pursuant to the over-subscription privilege, then such holder will be allocated only that number of shares for which the holder over-subscribed.

For example, if Stockholder A is allocated 100 shares pursuant to the formula described above but subscribed for only 40 additional shares pursuant to the over-subscription privilege, Stockholder A’s allocation would be reduced to 40 shares. (Example B)

 

   

Fourth, any shares of Class A common stock that remain available as a result of the allocation described above being greater than a holder’s over-subscription request (the 60 additional shares in Example B above) will be allocated among all remaining holders who exercised the over-subscription privilege and whose initial allocations were less than the number of shares they requested. This second allocation will

 

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be made pursuant to the same formula described above and repeated, if necessary, until all available shares of our Class A common stock have been allocated or all over-subscription requests have been satisfied in full.

To properly exercise your over-subscription privilege, you must deliver the subscription payment related to your over-subscription privilege before the rights offering expires. Because we will not know the total number of unsubscribed shares of Class A common stock before the rights offering expires, if you wish to maximize the number of shares of CAC shares you purchase pursuant to your over-subscription privilege, you will need to deliver payment in an amount equal to the aggregate subscription price for the maximum number of shares that could be available to you at the time you exercise your basic subscription rights (i.e., the aggregate payment for both your basic subscription right and for all additional shares you desire to purchase pursuant to your over-subscription request). See “The Rights Offering—The Subscription Rights—Over-subscription Privilege.” Any excess subscription payments received by the Subscription Agent, including payments for additional shares you requested to purchase pursuant to the over-subscription privilege but which were not allocated to you, will be returned, without interest or penalty, as soon as practicable following the expiration of the rights offering.

Fractional shares resulting from the exercise of the over-subscription privilege will be eliminated by rounding up to the nearest whole share.                     , our Subscription Agent for the rights offering, will determine, in its sole discretion, the over-subscription allocation based on the formula described above.

Why is Caesars Entertainment conducting the rights offering?

Caesars Entertainment’s board of directors has determined that pursuing the Transactions, in which the rights offering forms an integral part, is in the best interests of Caesars Entertainment and its stockholders, and that the rights offering for CAC would provide the following expected benefits, among other things:

 

   

Opportunity for Investors. Caesars Entertainment’s board of directors believes that the rights offering will benefit its stockholders by giving them access to a growth-oriented investment vehicle and the ability to obtain an indirect ownership in Growth Partners, a company with a simple and flexible capital structure that will provide a competitive advantage in the pursuit of high return, capital intensive investment opportunities in land-based casino gaming, regulated online real-money gaming, and social and mobile games.

 

   

Growth Focus and Flexibility. Growth Partners’ flexible capital structure provides it with the ability to bid on and develop new projects in new and expanding markets quickly without the constraints of a more complex capital structure. We believe that Growth Partners’ capital structure will provide access to the equity and debt markets for additional liquidity, which will position Growth Partners to capitalize on new growth opportunities.

 

   

Stockholder Flexibility to Own CAC Businesses. Because the subscription rights are being distributed, at no charge, to Caesars Entertainment’s existing stockholders, stockholders will have the choice to own shares in both companies or in either company separately.

How was the $9.43 per share subscription price determined?

CAC’s board of directors has determined that the subscription price will be $9.43 per whole share. In determining the subscription price, the board of directors of CAC considered, among other things, the valuation of assets sold and contributed to Growth Partners. Neither CAC nor its board of directors retained a financial advisor in connection with the Transactions. There can be no assurance that shares of our Class A common stock will trade at prices near or above the subscription price after the date of this prospectus. You should not consider the subscription price to be an indication of the price at which CAC’s Class A common stock will trade following the rights offering.

 

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What was the process that Caesars Entertainment used to value the assets sold and contributed to Growth Partners?

The Valuation Committee engaged Evercore to act as a financial advisor in connection with the Transactions to provide valuation advice to the Valuation Committee. The board of directors of Caesars Entertainment engaged Evercore to provide certain opinions about the respective values of the assets sold and contributed to Growth Partners, the equity interests and other consideration received in consideration for the contribution of certain of such assets, and the fairness from a financial point of view to Caesars Entertainment of the total consideration to be received in consideration for the sale and contribution of such assets to Growth Partners.

Am I required to exercise any or all of the subscription rights I receive in the rights offering?

No. You may exercise any number of your subscription rights or you may choose not to exercise any subscription rights.

If you do not exercise any subscription rights, you will not receive any shares of our Class A common stock. If you exercise all of your basic subscription rights, your ownership interest in CAC will be equivalent to the ownership interest you currently have in Caesars Entertainment. For example, assuming that the subscription rights are exercised in full by all holders of subscription rights, if you own 1% of Caesars Entertainment’s common stock on the record date and exercise your basic subscription rights in full you will own 1% of the Class A common stock of CAC following the rights offering. If you choose to exercise your basic subscription rights in part, your ownership interest in CAC will be diluted by other stockholders who exercise their subscription rights in full. In addition, if you do not fully exercise all your basic subscription rights, you will not be entitled to participate in the over-subscription privilege, and you may be subject to adverse tax consequences. See “Risk Factors—Risks Related to the Rights Offering—If you receive but do not sell or exercise the subscription rights before they expire, you may be subject to adverse U.S. federal income tax consequences.”

The number of shares of Caesars Entertainment’s common stock that you own, and your percentage ownership, will not change as a result of the rights offering. If you do not exercise your subscription rights to purchase shares of CAC’s Class A common stock, following the consummation of the Transactions, your indirect ownership interest in the business of Growth Partners will decrease as CAC will use the net proceeds of this offering to acquire voting units in CGP LLC. In addition, the trading price of Caesars Entertainment’s common stock immediately following the rights offering may be higher or lower than immediately prior to the rights offering because, after giving effect to the use of proceeds from this offering, a smaller portion of earnings from Growth Partners’ assets will be reflected in Caesars Entertainment’s earnings. CAC will receive cash proceeds of approximately $1,182.0 million as a result of the sale of shares of CAC’s Class A common stock (assuming the subscription rights are exercised in full).

How soon must I act to exercise my subscription rights?

If you received a rights certificate and elect to exercise any or all of your subscription rights, the Subscription Agent must receive your completed and signed rights certificate and payments before the rights offering expires on                     , 2013, at 5:00 p.m., New York City time. If you hold your shares in the name of a broker, dealer, custodian bank or other nominee, your nominee may establish a deadline before the expiration of the rights offering by which you must provide it with your instructions to exercise your subscription rights. Although CAC may, in its discretion, extend the expiration date of the rights offering, it currently does not intend to do so. In addition, CAC may cancel the rights offering for various reasons, see “The Rights Offering—Conditions, Withdrawal, and Cancellation.” If the rights offering is cancelled, all subscription payments received will be returned, without interest or penalty, as soon as practicable following the cancellation of the rights offering.

Although we will make reasonable attempts to provide this prospectus to Caesars Entertainment stockholders, the rights offering and all subscription rights will expire on the expiration date, whether or not we have been able to locate each person entitled to subscription rights.

 

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May I transfer my subscription rights?

No. The subscription rights are non-transferable. See “Risk Factors—Risks Related to the Rights Offering—The subscription rights are not transferable, and there is no market for the subscription rights.”

Have any stockholders indicated that they will exercise their rights?

Yes. Affiliates of the Sponsors, which beneficially own approximately 70% of Caesars Entertainment’s outstanding shares of common stock as of the date hereof, have indicated that they currently intend to exercise their rights under the basic subscription right in full, though they have not entered into any agreement to do so. Consummation of the Transactions is contingent on the exercise of subscription rights of at least $500.0 million by affiliates of the Sponsors, which would represent approximately 42% of our Class A common stock (assuming the subscription rights are exercised in full). As a result, following the completion of the rights offering and the granting of the Sponsor CAC Proxy, we expect Hamlet Holdings will beneficially own at least approximately 70% of our Class A common stock. Affiliates of the Sponsors have not indicated whether they intend to exercise their over-subscription privilege.

Will Hamlet Holdings control CAC following the rights offering?

We expect Hamlet Holdings to control CAC upon completion of the rights offering and the granting of the Sponsor CAC Proxy. Affiliates of the Sponsors will receive subscription rights on a pro rata basis with other Caesars Entertainment stockholders, based on their holdings of Caesars Entertainment on the record date. Affiliates of the Sponsors beneficially own approximately 70% of Caesars Entertainment’s common stock as of the date hereof, which would entitle them to receive subscription rights to purchase approximately 70% of CAC. In addition, affiliates of the Sponsors, through the Sponsor CAC Proxy, may increase Hamlet Holdings’ percentage beneficial ownership of CAC through their exercise of the over-subscription privilege, through open market purchases of CAC’s Class A common stock or otherwise. Affiliates of the Sponsors have advised Caesars Entertainment that they intend to exercise subscription rights of at least $500.0 million, which would represent approximately 42% of our Class A common stock (assuming the subscription rights are exercised in full), though they have not entered into any agreement to do so.

Other than the condition that affiliates of the Sponsors exercise subscription rights of at least $500.0 million, Caesars Entertainment is not requiring an overall minimum subscription to complete the rights offering. However, the rights offering is subject to the satisfaction or waiver by Caesars Entertainment or CAC, as applicable, of certain conditions. In addition, CAC has the right to withdraw and cancel the rights offering if, at any time prior to its expiration, the board of directors of CAC determines, in its sole discretion, that the Transactions cannot proceed on the terms contemplated and as described under “Certain Relationships and Related Party Transactions—Transaction Agreement.”

Are there any conditions to closing the rights offering?

Yes. Caesars Entertainment’s obligation to commence the rights offering and our obligation to distribute the shares of our Class A common stock subscribed for in the rights offering and to close the Transactions is conditioned upon the satisfaction or waiver of certain conditions. See “The Rights Offering—Conditions, Withdrawal and Cancellation.” In addition, CAC reserves the right to withdraw and cancel the rights offering if, at any time prior to its expiration, the board of directors of CAC determines, in its sole discretion, that the Transactions cannot proceed on the terms contemplated and as described under “Certain Relationships and Related Party Transactions—Transaction Agreement.”

Can CAC cancel or extend the rights offering?

The rights offering is subject to the satisfaction or waiver by Caesars Entertainment or CAC, as applicable, of certain conditions. In addition, CAC has the right to withdraw and cancel the rights offering if, at any time

 

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prior to its expiration, the board of directors of CAC determines, in its sole discretion, not to proceed with the Transactions on the terms contemplated and as described under “Certain Relationships and Related Party Transactions—Transaction Agreement.” If the rights offering is cancelled, any money received from subscribing stockholders will be returned, without interest or penalty, as soon as practicable following the cancellation of the rights offering. If CAC cancels the rights offering, the subscription rights will be void, of no value and will cease to be exercisable for shares of CAC’s Class A common stock. CAC may also extend the rights offering for additional periods, although it does not presently intend to do so.

You should discuss with your tax advisor the tax consequences of receiving subscription rights if CAC subsequently cancels the rights offering. See “—What are the material U.S. federal income tax consequences if I receive a subscription right from Caesars Entertainment and CAC subsequently cancels the rights offering.”

Will officers and directors of Caesars Entertainment of CAC be able to exercise subscription rights?

Officers and directors of Caesars Entertainment and CAC that hold shares of Caesars Entertainment’s common stock may participate in the rights offering at the same subscription price per share as all other holders of subscription rights, but none of their or our officers or directors is obligated to participate.

Affiliates of the Sponsors have advised Caesars Entertainment that they intend to exercise subscription rights of at least $500.0 million though they have not entered into any agreement to do so. You should not view the intentions of the affiliates of the Sponsors as a recommendation or other indication, by them or any member of Caesars Entertainment’s or CAC’s board of directors, regarding whether the exercise of the subscription rights or the over-subscription privilege is or is not in your best interests. See “The Rights Offering—Principal Stockholders.”

Has Caesars Entertainment’s board of directors made a recommendation to Caesars Entertainment’s stockholders regarding the rights offering?

No. Caesars Entertainment’s board of directors is making no recommendation regarding your exercise of the subscription rights. Stockholders who exercise subscription rights will incur investment risk on new money invested. Neither we nor Caesars Entertainment can predict the price at which our shares of common stock will trade after the offering. The market price for our Class A common stock may be below the subscription price, and, if you purchase shares of Class A common stock at the subscription price, you may not be able to sell the shares in the future at the same price or a higher price. In addition, we intend to apply to list shares of our Class A common stock for trading on the NASDAQ Capital Market; however, there can be no assurance that we will achieve a listing upon completion of this offering or thereafter. You should make your decision based on your assessment of our business and financial condition, our prospects for the future, the terms of the rights offering and the information contained in this prospectus. See “Risk Factors” for a discussion of some of the risks involved in investing in our Class A common stock.

Hamlet Holdings beneficially own approximately 70% of Caesars Entertainment’s outstanding shares of common stock as of the date hereof. Caesars Entertainment is controlled by Hamlet Holdings and, after completion of the rights offering and the granting of the Sponsor CAC Proxy, CAC is expected to be controlled by Hamlet Holdings. You should not view the intentions of the affiliates of the Sponsors as a recommendation or other indication, by them or any member of Caesars Entertainment or CAC’s board of directors, regarding whether the exercise of the subscription rights is or is not in your best interests.

How do I exercise my subscription rights if I am a registered holder of Caesars Entertainment’s common stock?

If you are a registered holder of Caesars Entertainment’s common stock and you wish to participate in the rights offering, you must take the following steps:

 

   

deliver payment (as set forth below) to the Subscription Agent before 5:00 p.m., New York City time, on                     , 2013; and

 

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deliver a properly completed and duly executed rights certificate to the Subscription Agent before 5:00 p.m., New York City time, on                     , 2013.

In certain cases, you may be required to provide additional documentation if you are signing the rights certificate as a fiduciary or representative of the registered holders(s).

Please follow the delivery instructions on the rights certificate. Do not deliver subscription documents, the rights certificate or payment to Caesars Entertainment or to CAC. The risk of delivery to the Subscription Agent of your subscription documents, rights certificate and payment is borne by you, and not by CAC, Caesars Entertainment or the Subscription Agent. You should allow sufficient time for delivery of your subscription materials to the Subscription Agent so that the Subscription Agent receives them prior to 5:00 p.m., New York City time, on                     , 2013.

You must timely pay the full subscription price in U.S. dollars for the full number of shares of CAC’s Class A common stock you wish to acquire in the rights offering, including any shares you wish to acquire pursuant to the over-subscription privilege. You must deliver to the Subscription Agent payment in full, by cashier’s or certified check drawn upon a United States bank payable to the Subscription Agent at the address set forth below, before the expiration of the rights offering period. Personal checks and wire transfers will not be accepted.

How do I participate in the rights offering if my shares are held in the name of a broker, dealer, custodian bank or other nominee?

If you hold your shares of Caesars Entertainment’s common stock in the name of a broker, dealer, custodian bank or other nominee, then your nominee is the record holder of the shares you own. The record holder must exercise the subscription rights on your behalf in accordance with your instructions. If you wish to purchase our Class A common stock through the rights offering, you should contact your broker, dealer, custodian bank or nominee as soon as possible. Please follow the instructions of your nominee. Your nominee may establish a deadline that may be before the expiration date of the rights offering.

When will I receive my rights certificate?

Promptly after the date of this prospectus, the Subscription Agent will send a rights certificate to each registered holder of Caesars Entertainment’s common stock as of the close of business on the record date, based on the stockholder registry maintained by the transfer agent for Caesars Entertainment’s common stock. If you hold your shares of common stock in the name of a broker, dealer, custodian bank or other nominee, you will not receive an actual rights certificate. Instead, DTC, will electronically issue one subscription right to your nominee record holder for every share of Caesars Entertainment’s common stock that you beneficially own as of the record date.

What form of payment must I use to pay the subscription price?

You must timely pay the full subscription price in U.S. dollars for the full number of shares of CAC’s Class A common stock you wish to acquire in the rights offering, including any shares you wish to acquire pursuant to the over-subscription privilege. You must deliver to the Subscription Agent payment in full, by cashier’s or certified check drawn upon a United States bank payable to the Subscription Agent at the address set forth below, before the expiration of the rights offering period. Personal checks and wire transfers will not be accepted.

If you send a subscription payment that is insufficient to purchase the number of shares of Class A common stock you requested, or if the number of shares you requested is not specified in the rights certificate or subscription documents, the payment received will be applied to exercise your subscription rights to the fullest

 

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extent possible based on the amount of the payment received, subject to the availability of shares of Class A common stock under the over-subscription privilege and the elimination of fractional shares.

If you send a subscription payment that exceeds the amount necessary to purchase the number of shares CAC’s Class A common stock for which you have indicated an intention to purchase, then the remaining amount will be returned to you by the Subscription Agent, without interest or penalty, as soon as practicable following the expiration of the rights offering.

What is the record date for the rights offering?

Record ownership will be determined as of the close of business on                     , 2013, which we refer to as the record date.

When will I receive my CAC shares?

The distribution of the shares will be made by way of direct registration in book-entry form. No share certificates will be issued. If you purchase shares of CAC’s Class A common stock in the rights offering, as soon as practicable after the closing of the rights offering and the valid exercise of subscription rights pursuant to the basic subscription right and over-subscription privilege, and after all allocations and adjustments contemplated by the terms of the rights offering have been effected, the Subscription Agent will (i) credit your account or the account of your record holder with the number of shares of our Class A common stock that you purchased pursuant to the basic subscription right and the over-subscription privilege and (ii) mail to each holder of subscription rights who exercises the over-subscription privilege any excess amount, without interest or penalty, received in payment of the subscription price for excess shares of our Class A common stock that are subscribed for by such holder of subscription rights but not allocated to such holder of subscription rights pursuant to the over-subscription privilege.

After I exercise my subscription rights and send in my payment, may I withdraw or cancel my exercise of subscription rights?

No. All exercises of subscription rights are irrevocable unless the rights offering is cancelled, even if you later learn information that you consider to be unfavorable to the exercise of your subscription rights. However, exercises of subscription rights will be revocable if there is a fundamental change to the terms of this offering and the related transactions. You should not exercise your subscription rights unless you are certain that you wish to purchase shares of our Class A common stock at a price of $9.43 per whole share. See “Risk Factors—Risks Related to the Rights Offering—You may not revoke your exercise of the subscription rights and you could be committed to buying shares at a price above the prevailing market price after completion of the rights offering.”

What effect does the rights offering have on the outstanding common stock of Caesars Entertainment?

The issuance of CAC shares in the rights offering will not affect the number of shares of Caesars Entertainment’s common stock you own or your percentage ownership of Caesars Entertainment. The trading price of Caesars Entertainment’s common stock immediately following the rights offering may be higher or lower than immediately prior to the rights offering because, after giving effect to the use of proceeds from the offering, a smaller portion of earnings from Growth Partners’ assets will be reflected in Caesars Entertainment’s earnings. CAC will receive cash proceeds of approximately $1,182.0 million as a result of the sale of shares of CAC’s common stock (assuming the subscription rights are exercised in full).

What will CAC and Caesars Entertainment receive from the rights offering?

If all of the subscription rights are exercised in full, we estimate that the proceeds to CAC from the rights offering will be approximately $1,182.0 million. Caesars Entertainment will not receive any direct proceeds from the rights offering.

 

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Does CAC expect to pay cash dividends?

We do not anticipate paying any dividends for the foreseeable future. CAC’s sole source of funds will be the proceeds received from this offering, which will be used to consummate the Transactions. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Caesars Acquisition Company—Liquidity and Capital Resources.”

Are there risks in exercising my subscription rights?

Yes. The exercise of your subscription rights involves risks. Exercising your subscription rights involves the purchase of shares of CAC’s Class A common stock. You should consider this investment as carefully as you would consider any other equity investment. Among other things, you should carefully consider the risks described under the heading “Risk Factors” in this prospectus.

If the rights offering is not completed, will my subscription payment be refunded to me?

Yes. The Subscription Agent will hold all funds it receives in escrow in a segregated bank account until completion of the rights offering. If the rights offering is not completed, all subscription payments received by the Subscription Agent will be returned, without interest or penalty, as soon as practicable following the cancellation of the rights offering. If you own shares of Caesars Entertainment’s common stock in the name of a broker, dealer, custodian bank or other nominee, it may take longer for you to receive your subscription payment because the Subscription Agent will return payments through the nominee record holder of your shares. See “Risk Factors—Risks Related to the Rights Offering—CAC may cancel the rights offering at any time prior to the expiration of the rights offering and in such case neither Caesars Entertainment nor the Subscription Agent will have any obligation to you except to return your exercise payments.”

Will the Class A common stock of CAC be listed on a securities exchange?

No public market currently exists for our Class A common stock. We intend to apply to list our Class A common stock on the NASDAQ Capital Market under the symbol “CGP” and expect that trading on the NASDAQ Capital Market will begin the first trading day after the completion of this offering upon which the Company has met the listing criteria and been approved for listing by the NASDAQ Capital Market. However, we cannot assure you that we will achieve a listing upon completion of this offering or thereafter. We cannot predict when a listing will occur, the trading prices for our Class A common stock or whether an active trading market for our Class A common stock will develop. See “Risk Factors—Risks Related to Our Class A Common Stock.”

What will happen to the listing of Caesars Entertainment shares?

Nothing. Caesars Entertainment shares will continue to be listed on the NASDAQ Global Select Market under the symbol “CZR.”

What if I want to sell my shares of Caesars Entertainment’s common stock or my shares of CAC’s Class A common stock?

You should consult with your financial advisors, such as your stockbroker, bank or tax advisor. Neither Caesars Entertainment nor CAC makes any recommendations on the purchase, retention or sale of Caesars Entertainment’s common stock or CAC’s Class A common stock. In addition, the trading price of Caesars Entertainment’s common stock immediately following the rights offering may be higher or lower than immediately prior to the rights offering because Caesars Entertainment’s ownership of Growth Partners will decrease, after giving effect to the use of proceeds from the offering, and a smaller portion of earnings from Growth Partners’ assets will be reflected in Caesars Entertainment’s earnings. CAC will receive cash proceeds of approximately $1,182.0 million as a result of the sale of shares of CAC’s Class A common stock (assuming the subscription rights are exercised in full).

 

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If you decide to sell any shares of Caesars Entertainment’s common stock before the record date, you will not receive any subscription rights described in this prospectus in respect of the shares sold. If you own Caesars Entertainment’s common stock at the close of business on the record date and sell those shares after the record date, you will still receive the subscription rights that you would be entitled to receive in respect of Caesars Entertainment’s common stock you owned at the close of business on the record date.

What fees or charges apply if I purchase shares of Class A common stock in the rights offering?

Caesars Entertainment is not charging any fee or sales commission to issue subscription rights to you or to deliver shares to you if you exercise your subscription rights. If you exercise your subscription rights through your broker, dealer, custodian bank or other nominee, you are responsible for paying any fees your intermediary may charge you.

Growth Partners will use a portion of the proceeds from this offering to reimburse Caesars Entertainment and CAC for fees and expenses incurred in connection with this offering.

What are the material U.S. federal income tax consequences if I receive and exercise a subscription right?

You should discuss the U.S. federal income tax consequences of receiving and exercising a subscription right with your tax advisor, but, if you receive a subscription right, you should generally expect to have (1) taxable dividend income equal to the fair market value (if any) of the subscription right on the date of its distribution by Caesars Entertainment and (2) no additional income upon the exercise of the subscription right, if you choose to exercise such right. You will need to fund any tax resulting from the receipt of the subscription right with cash from other sources.

For a detailed discussion, see “Material U.S. Federal Income Tax Considerations.”

What are the material U.S. federal income tax consequences if I receive and do not exercise the right before it expires?

You should discuss the U.S. federal income tax consequences of receiving a subscription right and not exercising that right with your tax advisor, but, if you receive a subscription right from Caesars Entertainment and do not exercise that right before it expires, you should generally expect to have (1) taxable dividend income equal to the fair market value (if any) of the subscription right on the date of its distribution by Caesars Entertainment and (2) a short-term capital loss upon the expiration of such right in an amount equal to your adjusted tax basis (if any) in such right. In general, capital losses are available to offset only capital gains and may not be used to offset dividend or other income (except, to the extent of up to $3,000 of capital loss per year, in the case of a non-corporate U.S. stockholder). Accordingly, if you receive a subscription right from Caesars Entertainment and take no action, you may owe tax and need to fund that tax with cash from other sources. See “Risk Factors—Risks Related to the Rights Offering—If you receive but do not exercise the subscription rights before they expire, you may be subject to adverse U.S. federal income tax consequences.”

For a detailed discussion, see “Material U.S. Federal Income Tax Considerations.”

How will I be impacted if the distribution of rights to me is subject to withholding tax?

In certain circumstances, withholding tax or backup withholding tax may apply to the distribution by Caesars Entertainment of the subscription rights. If withholding tax or backup withholding tax applies to the distribution of the subscription rights to you, Caesars Entertainment, your broker (or other applicable withholding agent) will be required to remit any such withholding tax or backup withholding tax in cash to the Internal Revenue Service. Depending on the circumstances, Caesars Entertainment, the broker (or other applicable withholding agent) may obtain the funds necessary to remit any such withholding tax by asking you to provide the funds, by using funds in your account with the broker or by another means (if any) available. CAC shall

 

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reimburse Caesars Entertainment for any amounts paid by Caesars Entertainment with respect to withholding obligations on the distribution of the subscription rights.

For a detailed discussion, see “Material U.S. Federal Income Tax Considerations.”

What are the material U.S. federal income tax consequences if I receive a subscription right from Caesars Entertainment and CAC subsequently cancels the rights offering?

You should discuss the U.S. federal income tax consequences of receiving a subscription right if CAC subsequently cancels the rights offering with your tax advisor. There are limited authorities addressing the tax consequences that would apply to you in this circumstance. Certain of the authorities suggest that in this circumstance you may not have taxable dividend income upon the receipt of the subscription rights if the receipt and cancellation occur in the same taxable year. However, the scope of those authorities is unclear and Caesars Entertainment (and any other applicable withholding agent) is likely to take the position, for information reporting and withholding purposes, that you have taxable dividend income upon the receipt of the subscription rights even if CAC subsequently cancels the rights offering. If withholding tax is withheld from you in this event, you may wish to seek a refund of such amount from the Internal Revenue Service.

If you do have taxable dividend income upon the receipt of a subscription right even though CAC subsequently cancels the rights offering, you should generally expect to have a short-term capital loss upon the cancellation of the subscription right in an amount equal to your adjusted tax basis (if any) in such right.

For a detailed discussion, see “Material U.S. Federal Income Tax Considerations.”

How do I exercise my subscription rights if I live outside of the United States and Canada or have an army post office or fleet post office address?

The Subscription Agent will hold rights certificates for holders of Caesars Entertainment’s common stock having an address outside the United States and Canada, or who have an Army Post Office (APO) address or Fleet Post Office (FPO) address. In order to exercise subscription rights, such stockholders must notify the Subscription Agent and timely follow the additional procedures described under the heading “The Rights Offering—Foreign Stockholders.”

To whom should I send my forms and payment?

If your shares are held in the name of a broker, dealer or other nominee, you should send your subscription documents and subscription payment to that nominee. If you are the record holder, you should send your subscription documents, rights certificate and subscription payment by first class mail, hand delivery or courier service to:

 

By first class mail:

   By hand or overnight courier:

The risk of delivery to the Subscription Agent of subscription documents, rights certificates and subscription payments is borne by the holders of subscription rights, and not by CAC, Caesars Entertainment or the Subscription Agent. You should allow sufficient time for delivery of your subscription materials to the Subscription Agent.

Whom should I contact if I have other questions?

If you have more questions about the rights offering or need additional copies of the rights offering documents, please contact                     , our Information Agent, by calling (    )        -        (toll-free).

 

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RISK FACTORS

You should carefully consider the risk factors set forth below, as well as the other information contained in this prospectus. The risks described below are not the only risks facing us. Any of the following risks could materially and adversely affect our business, financial condition or operating results. In such a case, you may lose all or a part of your original investment.

Risks Related to Growth Partners’ Continued Dependence on Caesars Entertainment and the Transactions

CAC and Growth Partners are dependent on Caesars Entertainment and its subsidiaries to provide corporate services, back-office support and advisory and business management services through the CGP Management Services Agreement. CAC and Growth Partners cannot operate without the services provided by Caesars Entertainment and will be adversely affected if the CGP Management Services Agreement is terminated.

Pursuant to the CGP Management Services Agreement, Caesars Entertainment and its subsidiaries will provide corporate services, back-office support and advisory business management services to CAC and Growth Partners. See “Certain Relationships and Related Party Transactions—Agreements with Caesars Entertainment and its Subsidiaries—CGP Management Services Agreement.” CAC has few, and CGP LLC has no, employees and neither has any history of operating casinos or online entertainment. Therefore, the business and operations of CAC and Growth Partners are dependent on the services provided by Caesars Entertainment and its subsidiaries, and CAC and Growth Partners cannot operate without these services. If the quality of the services provided by Caesars Entertainment and its subsidiaries deteriorates, or the terms under which Caesars Entertainment and its subsidiaries provide services change in a manner that is adverse to Growth Partners, it could have a material adverse effect on CAC and Growth Partners’ business, financial condition and operating results.

In addition, if the CGP Management Services Agreement were to be terminated, or if Caesars Entertainment or its subsidiaries were to suffer significant liquidity or operational difficulties, becoming incapable of providing support and management services (or unable to provide such services at agreed upon level) to CAC or Growth Partners or cease operations altogether, CAC and/or Growth Partners would no longer have access to the operational support and management expertise provided by Caesars Entertainment and its subsidiaries and it could have a material adverse effect on CAC and Growth Partners’ business, financial condition and operating results. Any failure by CAC or Growth Partners to obtain the operational and management support of Caesars Entertainment and its subsidiaries, and particularly any failure by Growth Partners to obtain Caesars Entertainment’s expertise in operating casinos or maintain access to the Total Rewards loyalty program, would adversely affect CAC and/or Growth Partners’ business, financial condition and operating results.

Growth Partners is dependent on the expertise of Caesars Entertainment’s senior management, who may not be directly invested in Growth Partners’ success, which may have an adverse effect on Growth Partners and/or CAC’s business, financial condition and operating results.

Growth Partners will rely a great deal on the expertise and guidance of Caesars Entertainment’s senior management who do not receive direct compensation from Growth Partners. As a result, Caesars Entertainment’s senior management may devote substantially less time to the business and operations of Growth Partners than were they to be employed by Growth Partners. Senior management that is not invested in the success of Growth Partners’ business may have an adverse effect on Growth Partners and/or CAC’s business, financial condition and operating results.

Loss of the services of any key personnel from Caesars Entertainment could have a material adverse effect on the business of Growth Partners.

The leadership of Caesars Entertainment’s chief executive officer, Mr. Gary Loveman, and other executive officers, has been a critical element of Caesars Entertainment’s success. The advisory and management services provided to Growth Partners depends on these key executive officers. The death or disability of Mr. Loveman or

 

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other extended or permanent loss of his services, or any negative market or industry perception with respect to him or arising from his loss, could have a material adverse effect on Growth Partners’ business. Caesars Entertainment’s other executive officers and other members of senior management have substantial experience and expertise in the casino and online entertainment business. The unexpected loss of services of one or more of these individuals could also adversely affect Growth Partners. Growth Partners is not protected by key man insurance or similar life insurance covering members of Caesars Entertainment’s senior management, nor does Growth Partners have employment agreements with any of Caesars Entertainments executive officers.

A default by Caesars Entertainment on certain of its debt obligations could adversely affect Growth Partners’ business, financial condition and operating results.

Caesars Entertainment is a highly leveraged company and has pledged a significant portion of its assets and the assets of its subsidiaries as collateral under certain of its debt obligations, including the trademarks for which CIE has licensed the right to use, including “Caesars,” “Total Rewards” and “Harrah’s.” The stock of CEOC is also pledged to secure these debt obligations. If Caesars Entertainment or its subsidiaries were to default on these obligations, its lenders could exercise significant influence over Growth Partners’ business. Growth Partners is dependent on a number of services from Caesars Entertainment, CEOC, and other subsidiaries of Caesars Entertainment, pursuant to the CGP Management Services Agreement and CIE’s Shared Services Agreement. See “Certain Relationships and Related Party Transactions—Agreements with Caesars Entertainment and its Subsidiaries.” If Caesars Entertainment and its subsidiaries file for bankruptcy protection under the U.S. bankruptcy code, their filing may materially and adversely affect Growth Partners’ assets and operations. For example, in the event of a default by Caesars Entertainment, its lenders or their successors may elect to reject the CGP Management Services Agreement as an executory contract in a bankruptcy proceeding. Furthermore, in the event of such a default, Caesars Entertainment’s lenders also may seek to reject CIE’s cross-marketing and trademark license agreement with Caesars Entertainment in connection with a bankruptcy proceeding and, as a result, CIE would no longer have licenses to use certain trademarks owned by Caesars Entertainment or its subsidiaries. The result of this influence and any related disruption in Growth Partners’ business could have a material adverse effect on Growth Partners’ business, financial condition and operating results.

The value of the CEOC Notes held by Growth Partners would be impaired in the event of a default by Caesars Entertainment on certain of its debt obligations and such impairment could adversely affect the market price of our Class A common stock.

Caesars Entertainment is a highly leveraged company and has significant obligations for interest payments and restrictions due to its indebtedness. If Caesars Entertainment or CEOC is unable to pay the interest when due under their outstanding indebtedness, or otherwise defaults on their debt obligations, the value of the CEOC Notes held by Growth Partners would be impaired. Because the CEOC Notes constitute a significant portion of the value of Growth Partners, an impairment in the value of the CEOC Notes could adversely affect the market price of our Class A common stock.

Growth Partners has an obligation to give a right of first refusal for any development opportunities to Caesars Entertainment, but Caesars Entertainment has no obligation to give any development opportunities to Growth Partners. Caesars Entertainment may keep all potential development opportunities for itself. Growth Partners would need to rely on a separate party to pursue any opportunities without the approval and assistance of Caesars Entertainment.

Growth Partners is required to first provide any potential development opportunities to Caesars Entertainment to be considered by a committee of the Caesars Entertainment board of directors comprised of disinterested directors. Growth Partners can only proceed with such investment or opportunity to the extent such Caesars Entertainment committee declines the opportunity for itself or CEOC. See “Certain Relationships and Related Party Transactions—Agreements with Caesars Entertainment and its Subsidiaries.” If the committee provides an opportunity to Growth Partners, we expect that Growth Partners will retain a 50% interest in the management fee to be received by Caesars Entertainment, unless otherwise agreed. However, because each

 

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opportunity will be negotiated as a separate transaction, there can be no assurances that Growth Partners and Caesars Entertainment will share equally (or that Growth Partners will share at all) in the management fee. If the committee does not provide the opportunity to Growth Partners, the committee can also decide to keep the opportunity for Caesars Entertainment. No assurances can be provided that the committee will ever provide an opportunity to Growth Partners.

Although certain employees of each of the Sponsors are on the boards of directors of Caesars Entertainment and CAC, the certificates of incorporation of both companies provide that neither the Sponsors nor directors have any obligation to present any corporate opportunity to Caesars Entertainment or CAC. Accordingly, the Sponsors may pursue gaming, entertainment or other activities outside of Caesars Entertainment or CAC and have no obligation to present such opportunity to Caesars Entertainment or CAC; however, if any choose to present such opportunity to Caesars Entertainment or CAC, then such opportunity must follow the rights of first offer.

If the committee declines an opportunity altogether and Growth Partners pursues the opportunity without the support of Caesars Entertainment, Growth Partners will be required to identify and obtain the necessary services from a third party. No assurances can be provided that Growth Partners will be able to find a third party to pursue an opportunity without Caesars Entertainment and any services provided may be more expensive than, or of less quality than, those that are provided by Caesars Entertainment, and as a result, could have a material adverse impact on the success of the opportunity.

Caesars Entertainment’s interests may conflict with Growth Partners’ interests.

The interests of Caesars Entertainment could conflict with Growth Partners’ interests. Caesars Entertainment is in a casino and entertainment business similar to Growth Partners and may, from time to time in the future, pursue for itself acquisitions that would be complementary to Growth Partners’ business, in which case, and as a result, those acquisition opportunities would not be available to us. Without access to acquisition opportunities, Growth Partners will be limited in growing its business.

The success of Growth Partners’ business depends in part on its continued participation in Caesars’ Total Rewards loyalty program. If CIE, Planet Hollywood and Horseshoe Baltimore are unable to access the Total Rewards loyalty program database, it could have a material adverse impact on Growth Partners’ business.

The success of Growth Partners’ business depends in part on its ability to direct targeted marketing efforts to important casino and non-gaming customers. The ability of Growth Partners’ business to undertake those marketing efforts depends to a significant extent on its continued participation in the Total Rewards loyalty program owned and maintained by Caesars Entertainment. In connection with this program, CIE and Planet Hollywood can, and Horseshoe Baltimore will be able to, develop information which allows them to track casino play and award complimentaries and other promotional opportunities to their customers. Complimentaries and other similar rewards are customarily offered by casino and gaming facilities to their customers and are important incentives to those customers. If CIE, Planet Hollywood and Horseshoe Baltimore are unable to access the Total Rewards loyalty program database, it could have a material adverse impact on Growth Partners’ business.

CIE licenses its right to use and sublicense various trademarks and service marks from Caesars Entertainment and certain of its affiliates. Accordingly, if a third party successfully challenges Caesars Entertainment or its affiliates’ ownership of, or right to use, the Caesars-related marks or if CIE is unable to stop unauthorized use of such marks, or if Caesars Entertainment or its affiliates use such marks in a way that negatively impacts the value of such marks, CIE’s, and therefore Growth Partners’, business or results of operations could be harmed.

CIE has licensed the right to use certain trademarks and service marks owned or used by various affiliates of Caesars Entertainment, including Caesars World, Inc., Caesars License Company, LLC and CEOC. These licensed trademarks and service marks include, among others, “Caesars,” “Harrah’s” and “Total Rewards.” See “Certain Relationships and Related Party Transactions.” CIE’s rights to use these trademarks and service marks are among its most valuable assets.

 

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If the existing licensing arrangements were terminated and CIE fails to enter into new arrangements in respect of these marks, CIE could lose its rights to use these marks and the corresponding domain names, which could have a material adverse effect on its business, financial condition and operating results. If a third party successfully challenges Caesars Entertainment or its affiliates’ ownership of, or right to use, these marks (including, for example, due to Caesars Entertainment or its affiliates’ failure to file for protection of such marks), such a challenge could also have a material adverse effect on CIE’s, therefore Growth Partners’, business, financial condition and operating results. Furthermore, if any of the entities from whom CIE licenses the right to use such marks enters into a bankruptcy proceeding, its rights to use some or all of such marks could be terminated, which could also have a material adverse effect on CIE’s, therefore Growth Partners’, business, financial condition and operating results.

In addition, these trademarks and service marks are used by Caesars Entertainment and its affiliates around the United States and internationally. Any negative events associated with the use of these marks by Caesars Entertainment or its affiliates may be out of Growth Partners’ control, and may negatively impact the “Caesars”, “Harrah’s” or “Total Rewards” brands, which could harm CIE’s, and therefore Growth Partners’, business and results of operations.

CIE may be reliant on Caesars Entertainment to obtain online gaming licenses in many commercial jurisdictions and if the affiliation is terminated, or costs to maintain such affiliation exceed revenue generated from such affiliation, it would adversely affect CIE’s, and therefore Growth Partners’, business and result of operations.

Nevada, Delaware and New Jersey have enacted laws, and several states and the Federal government are considering draft laws, that require online casinos to also have a license to operate a brick-and-mortar casino, either directly or indirectly through an affiliate. If, like Nevada, Delaware and New Jersey, other U.S. jurisdictions enact legislation legalizing real money casino gaming subject to this brick-and-mortar requirement, CIE may be unable to offer online real money gaming in such jurisdictions if CIE does not have or is unable to establish an affiliation with a brick-and-mortar casino in such jurisdiction. If CIE is able to offer online real money gaming in such jurisdictions because of CIE’s affiliation with Caesars Entertainment, CIE will be reliant on continuing its relationship with Caesars Entertainment, and there can be no assurances that Caesars Entertainment will continue to maintain such affiliation. If CIE’s affiliation with Caesars Entertainment is terminated or the costs to maintain such affiliation exceed revenue generated from online real money gaming, it would adversely affect CIE’s, and therefore Growth Partners’, business and result of operations.

A bankruptcy court may conclude that the Transactions constituted a financing rather than a true sale and as a result we would no longer have ownership and control over assets sold or contributed to Growth Partners to the extent as we do now.

In a bankruptcy of Caesars Entertainment or any of its subsidiaries that sold or contributed assets to Growth Partners, the court may conclude that the Transactions are a disguised financing rather than a true sale. In such case, the court would deem Growth Partners’ assets as belonging to Caesars Entertainment, and consider CAC to be Caesars Entertainment’s lender to the extent of the purchase price Growth Partners paid for those assets. While we should have a claim against Caesars Entertainment for the amounts paid to Caesars Entertainment for the assets, we would no longer have ownership and control over the assets to the same extent as we do now. Moreover, if our claim against Caesars Entertainment is considered a financing, there is no guaranty that our claim will be deemed a secured claim entitled to a priority right of repayment from the assets, rather than a general unsecured claim against Caesars Entertainment’s bankruptcy estate that shares pro rata with other creditors in any recovery from the residual value of the bankruptcy estates. Finally, a risk exists that any such claim might be primed in favor of a debtor-in-possession financing, or that the court might equitably subordinate, or perhaps equitably disallow, our claim to those of other creditors.

 

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A bankruptcy court may substantively consolidate the bankruptcy estates of Caesars Entertainment and its debtor subsidiaries with Growth Partners, which would, among other things, allow the creditors of the bankrupt entities to satisfy their claims from the combined assets of the consolidated entities, including Growth Partners.

Even though Growth Partners has certain bankruptcy remote features that restrict its ability to file for bankruptcy relief, there can be no assurance that a bankruptcy court will not direct Growth Partners’ substantive consolidation with Caesars Entertainment or a subsidiary of Caesars Entertainment in a bankruptcy case of Caesars Entertainment or such subsidiary even if Growth Partners does not itself file a bankruptcy petition. Growth Partners’ substantive consolidation with Caesars Entertainment or its subsidiaries in their bankruptcy cases would, among other things, allow the creditors of the bankrupt entities to satisfy their claims from the combined assets of the consolidated entities, including Growth Partners. This may dilute the value of distributions available for recovery to Growth Partners’ creditors, and may prevent recovery by our stockholders of any value at all if the combined creditor claims exceed the combined value of the entities. In addition, substantive consolidation with Caesars Entertainment or its subsidiaries’ bankruptcies may subject our assets and operations to the automatic stay, and may impair Growth Partners’ ability to operate independently, as well as otherwise restrict our operations and capacity to function as a standalone enterprise.

A Caesars Entertainment bankruptcy filing might trigger an independent investigation of the Transactions, and expose our and Growth Partners’ contractual relationships with Caesars Entertainment and its subsidiaries to heightened scrutiny.

If Caesars Entertainment or its subsidiaries file for bankruptcy relief, it may result in an independent investigation of the Transactions. For example, a trustee or examiner may be appointed in the Caesars Entertainment bankruptcy case with the power to investigate the Transactions and determine, with the benefit of hindsight, whether the Transactions overall, and their constituent parts, were fair and equitable and otherwise beneficial to Caesars Entertainment or any bankrupt subsidiary. Any such investigation may impose significant costs and expense on us and Growth Partners, and may divert management from its ability to conduct our business. In addition, we would expect that Caesars Entertainment stakeholders, including any creditors committee appointed in such bankruptcy cases, would re-evaluate all of our and Growth Partners’ contractual and business relationships with Caesars Entertainment and its subsidiaries. This may result in materially altered terms and conditions that may be economically unfavorable to investors in CAC, and may divert significant management resources.

We may be subject to fraudulent transfer litigation that may require us to return the assets acquired in the Transactions, or their value, to Caesars Entertainment.

Creditors of Caesars Entertainment and its subsidiaries may sue us and/or Growth Partners under state or federal bankruptcy law in an effort to recover, for their benefit, the assets we acquired in the Transactions. As a general matter, fraudulent transfer law allows a creditor to recover assets, or their value, from an initial or subsequent transferee if the debtor conveyed the assets with an actual intent to hinder, delay or defraud its creditors, or if the transfer was a constructive fraud. A constructive fraud exists even in the absence of an actual intent to defraud creditors. The principal elements of a constructive fraud are a transfer, made while the debtor was insolvent, for less than reasonably equivalent value or fair consideration. A court may “collapse” the component steps of the restructuring into a single set of integrated transactions to determine whether the restructuring overall effected a fraudulent transfer. If we and/or Growth Partners are subject to a fraudulent transfer suit, we may have to return the assets or their value to Caesars Entertainment.

Our operations depend on material contracts with third parties, including Caesars Entertainment, the continued enforcement of which may be adversely impacted by a Caesars Entertainment bankruptcy.

A debtor operating under the protection of the Bankruptcy Code may exercise certain rights that may adversely affect our contractual relations and ability to participate in the Caesars Entertainment system.

 

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For example, the protection of the statutory automatic stay which arises by operation of section 362 of the Bankruptcy Code upon the commencement of a bankruptcy case would prohibit us from terminating a contract with Caesars Entertainment or any of its debtor subsidiaries. The Bankruptcy Code also invalidates clauses that permit the termination of contracts automatically upon the filing by one of the parties of a bankruptcy petition or which are conditioned on a party’s insolvency. Meanwhile in this circumstance, we would ordinarily be required to continue performing our obligations under such agreement. As a practical matter, legal proceedings to obtain relief from the automatic stay and to enforce rights to payments or terminate agreements can be time consuming and uncertain as to outcome.

In addition, under section 365 of the Bankruptcy Code, a debtor may decide whether to assume or reject an executory contract, including the CGP Management Services Agreement, the management contracts for Planet Hollywood and the Maryland Joint Venture, the management contracts with CIE or the limited liability company agreement of CGP LLC (“the CGP Operating Agreement”). Assumption of a contract would permit the debtor to continue operating under the assumed contract; provided that the debtor (i) immediately cures all existing defaults thereunder or provides adequate assurance that such defaults will be promptly cured, (ii) compensates the non-debtor party for any actual monetary loss incurred as a result of the debtor’s default or provides adequate assurance that such compensation will be forthcoming and (iii) provides the non-debtor party with adequate assurance of future performance under the contract. As a general matter, a bankruptcy court approves a debtor’s assumption of a contract as long as assumption appears to be in the best interest of the debtor’s estate, the debtor is able to perform and it is a good business decision to assume the contract. Subject to bankruptcy court approval and satisfaction of the “business judgment” rule, a debtor in chapter 11 may reject an executory contract, and rejection of an executory contract in a chapter 7 case may occur automatically by operation of law. If a debtor rejects an executory contract, the non-debtor party to the contract generally has an unsecured claim against the debtor’s bankruptcy estate for breach of contract damages arising from the rejection. On request of any party to such contract, a bankruptcy court may order the debtor to determine within a specific period of time whether to assume or reject an executory contract.

Caesars Entertainment, as debtor, may seek bankruptcy court approval to assume its CGP Management Services Agreement under section 365 of the Bankruptcy Code and may also seek to assign such agreement to a third party. It may also seek to reject such contract. If Caesars Entertainment or an applicable debtor subsidiary rejects the CGP Management Services Agreement, we may no longer have access to the operational support and management expertise provided by Caesars Entertainment and its subsidiaries with the result that we may lack sufficient support to manage our operations.

In addition, a debtor may attempt to reject the CGP Operating Agreement as an executory contract. This might affect our continued existence, and other corporate governance rights. It may also relieve Caesars Entertainment from performing its obligations under Growth Partners’ limited liability company agreement, including honoring its obligations under the liquidation right and call right described under “Certain Relationships and Related Party Transactions.”

Claims of our stockholders and Growth Partners against Caesars Entertainment or its subsidiaries in a Caesars Entertainment bankruptcy might be equitably subordinated or disallowed.

Bankruptcy law allows the court to equitably subordinate, or perhaps even equitably disallow, claims to those of other creditors based on inequitable conduct. Claims of insiders, including stockholders, are subject to heightened scrutiny and a court may find inequitable conduct in the form of overreaching or self-dealing transactions. If a claim is subordinated to those of other creditors, the claim will likely receive no distribution from the bankruptcy estate unless the estate has enough assets to satisfy the non-subordinated creditors in full; a claim that is disallowed on equitable grounds would not share in recoveries from the estate to the extent of such disallowance. The equitably subordinated or disallowed claim need not necessarily relate to the inequitable conduct. Therefore, a damages claim arising from the rejection of an executory contract may be subordinated or disallowed based on conduct wholly unrelated to the contractual relationship itself. Under these principles, should a court determine that they are triggered in a bankruptcy of Caesars Entertainment or its subsidiaries,

 

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claims of our stockholders and Growth Partners, including claims based on notes issued by Caesars Entertainment or CEOC or guarantees by Caesars Entertainment, may not share ratably with claims from other general unsecured creditors or may be disallowed.

Risks Related to Growth Partners’ Business

Growth Partners may not realize all of the anticipated benefits of current or potential future acquisitions.

Growth Partners’ ability to realize the anticipated benefits of acquisitions will depend, in part, on its ability to integrate the businesses of such acquired companies with its business. The combination of two independent companies is a complex, costly and time consuming process. This process may disrupt the business of either or both of the companies, and may not result in the full benefits expected. The difficulties of combining the operations of two companies, include, among others:

 

   

coordinating marketing functions;

 

   

undisclosed liabilities;

 

   

unanticipated issues in integrating information, communications and other systems;

 

   

unanticipated incompatibility of purchasing, marketing and administration methods;

 

   

retaining key employees;

 

   

consolidating corporate and administrative infrastructures;

 

   

the diversion of management’s attention from ongoing business concerns;

 

   

coordinating geographically separate organizations; and

 

   

obtaining all necessary gaming regulatory approvals.

For instance, CIE has been highly reliant on its acquisition of Playtika Ltd. (“Playtika”) to generate revenues, and Growth Partners may not realize the expected benefits of CIE’s acquisition of Playtika due to one or more of the difficulties listed above or other difficulties associated with the combination of the operations of two companies. If Growth Partners is unable to realize in whole or in part the benefits anticipated for any current or future acquisitions, it could have a material adverse effect on its, and therefore Growth Partners’, business, financial condition and operating results.

Growth Partners may require additional capital to support business growth, and this capital might not be available on acceptable terms or at all.

Growth Partners intends to continue to make significant investments to support its business growth and may require additional funds to respond to business challenges, including the need to expand into new markets, develop new games and features or enhance CIE’s existing games, improve its operating infrastructure or acquire complementary businesses, personnel and technologies. Accordingly, CAC and Growth Partners may need to engage in equity or debt financings to secure additional funds. If CAC raises additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our Class A common stock. Any debt financing we or Growth Partners secures in the future could involve restrictive covenants relating to capital raising activities and other financial and operational matters, which may make it more difficult to obtain additional capital and to pursue business opportunities, including potential acquisitions. CAC and Growth Partners are newly formed entities with no operating results to date and may not be able to obtain additional financing on favorable terms, if at all. For instance, the lack of operating history and relationship with Caesars Entertainment may impede Growth Partners’ ability to raise debt or equity financing on acceptable terms, if at all, and there can be no assurances that we could pursue a future offering of securities at an appropriate price to raise the necessary financing. If CAC and Growth Partners are unable to obtain adequate

 

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financing or financing on terms satisfactory to them when they require it, their ability to continue to support Growth Partners’ business growth and to respond to business challenges could be significantly impaired, which could have a material adverse effect on Growth Partners’ business, financial condition and operating results.

CAC and Growth Partners do not have restrictions on their ability to raise debt and may highly leverage their capital structure, which could adversely affect Growth Partners’ ability to pursue certain opportunities.

CAC and Growth Partners are a newly formed companies without any restrictions on their ability to raise a significant amount of debt financing and alter its capital structure. Should CAC or Growth Partners significantly leverage themselves, CAC or Growth Partners will be subject to considerable interest payment expenses that could adversely affect our ability to obtain additional financing. Further, once CAC has a highly leveraged capital structure, Growth Partners may lose certain advantages it has against competitors that have a similar capital structures that makes pursuing new, capital-intensive, opportunities more challenging.

Our historical financial information may not be a reliable indicator of our future results.

The historical financial information we have included in this prospectus has been prepared on a carve-out basis from consolidated financial statements in accordance with assumptions and allocations that we believe are reasonable. However, such historical financial information does not necessarily reflect what our financial position, results of operations and cash flows would have been as a stand-alone entity separate from Caesars Entertainment during the periods presented. Caesars Entertainment did not account for us, and we were not operated as a single stand-alone entity or segment for all the periods presented. In addition, the historical information is not necessarily indicative of what our results of operations, financial position and cash flows will be in the future.

Growth Partners’ business may be subject to seasonal fluctuations which could result in volatility or have an adverse effect on the market price of our Class A common stock.

Growth Partners’ business may be subject to some degree of seasonality. For example, in the case of CIE, it may experience seasonality based on the playing habits of its players. As the growth of CIE’s business stabilizes, the seasonal fluctuations may become more evident. In the case of Planet Hollywood, weather conditions may deter or prevent customers from reaching Planet Hollywood’s facility or undertaking day trips. Such conditions would particularly affect customers who are travelling longer distances to visit Planet Hollywood. In addition, we believe the number of customer visits to Planet Hollywood will fluctuate based on the season, with winter months experiencing lower turnout. Seasonality may cause CIE and Planet Hollywood’s working capital cash flow requirements to vary from quarter to quarter depending on the variability in the volume and timing of sales. These factors, among other things, make forecasting more difficult and may adversely affect CIE and Planet Hollywood’s ability to manage working capital and to predict financial results accurately, which could adversely affect the market price of our Class A common stock.

There may be a significant degree of difficulty in operating Growth Partners’ businesses separately from Caesars Entertainment, and managing that process effectively could require a significant amount of management’s time.

The separation from Caesars Entertainment could cause an interruption of, or loss of momentum in, the operation of Growth Partners’ businesses. Management may be required to devote considerable amounts of time to the separation, which will decrease the time they will have to manage their ordinary responsibilities. If management is not able to manage the separation effectively, or if any significant business activities are interrupted as a result of the separation, Growth Partners’ businesses and operating results could suffer.

 

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Growth Partners may be unable to achieve some or all of the benefits that it expects to achieve from the separation of its operations from Caesars Entertainment.

As a company with operations separate from Caesars Entertainment, we believe that Growth Partners will benefit from, among other things, allowing its businesses to better focus their financial and operational resources on their specific businesses and be better positioned to dedicate resources to pursue appropriate growth opportunities and execute strategic plans best suited to their business in an efficient manner. We believe the separation will allow the management of CIE and Planet Hollywood to design and implement corporate strategies and policies that are based primarily on the business characteristics and strategic decisions of their respective business, allowing them to more effectively respond to industry dynamics and allowing the creation of effective incentives for their management and employees that are more closely tied to their respective business performance. However, Growth Partners may not be able to achieve some or all of the benefits that we expect it to achieve as a company with operations separate from Caesars Entertainment in the time we expect, if at all.

We will be allocated taxable income from Growth Partners for U.S. federal income tax purposes regardless of whether we receive corresponding cash distributions from Growth Partners to pay our tax liability.

Because CGP LLC is a partnership for U.S. federal income tax purposes, we will be allocated taxable income from CGP LLC for U.S. federal income tax purposes for each fiscal year according to the terms of the CGP Operating Agreement. We will be required to pay U.S. federal income tax on such income at the current U.S. federal corporate income tax rate, regardless of whether CGP LLC makes corresponding cash distributions to us to pay our tax liability. The CGP Operating Agreement will provide for quarterly cash tax distributions to be made to us and Caesars Entertainment, but there is no guarantee that such tax distributions (or other cash distributions from CGP LLC) will be sufficient for us to pay our tax liabilities.

There are no assurances that there will be future development opportunities for Growth Partners or that Growth Partners will obtain a development project other than the Maryland Joint Venture.

Growth Partners’ ability to expand into new markets to pursue development opportunities depends on passage of legislation that legalizes gambling in new markets and Caesars Entertainment not exercising its right of first offer. Although in the past few years a number of states have passed legislation permitting the development of gaming facilities, there can be no assurances that such trend will continue, and it is possible that legislatures and public sentiment will turn against permitting the development of gaming facilities. Should the states pass no additional legislation for issuing licenses or permitting the development of gaming facilities, Growth Partners will be unable to pursue development opportunities in new markets. Moreover, even if new markets open up, there can be no assurances that Caesars Entertainment and/or Growth Partners will be successful in the bid process for any new development opportunities, therefore there can be no assurances that Growth Partners will be able to enter those new markets. Further, there can be no assurances that Caesars Entertainment will not exercise its right of first refusal, thereby depriving Growth Partners of access to any potential development project. See “Certain Relationships and Related Party Transactions—Agreements with Caesars Entertainment and its Subsidiaries.”

The bonds of CEOC and other fixed rate securities we hold are sensitive to fluctuations in interest rates and would decrease in value if the interest rate increases.

As of March 31, 2013, as adjusted for the effects of the Transactions, Growth Partners holds approximately $1.1 billion in aggregate principal amount of the CEOC Notes with fixed rates of interest. Fixed rate securities are sensitive to fluctuations in market interest rates and if interest rates increase, the fixed rate securities held by Growth Partners will decrease in value. Currently, market interest rates have been at record low rates. Accordingly, an increase in market interest rates from current levels could cause the value of the fixed rate securities to decrease significantly.

 

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Any violation of the Foreign Corrupt Practices Act or other similar laws and regulations could have a negative impact on Growth Partners.

Growth Partners is subject to risks associated with doing business outside of the United States, which exposes Growth Partners to complex foreign and U.S. regulations inherent in engaging in a cross-border business and in each of the countries in which Growth Partners and its businesses transact business. Growth Partners is subject to regulations imposed by Foreign Corrupt Practices Act (the “FCPA”) and other anti-corruption laws that generally prohibit U.S. companies and their intermediaries from offering, promising, authorizing or making improper payments to foreign government officials for the purpose of obtaining or retaining business. Violations of the FCPA and other anti-corruption laws may result in severe criminal and civil sanctions as well as other penalties and the SEC and U.S. Department of Justice have increased their enforcement activities with respect to the FCPA. Internal control policies and procedures and employee training and compliance programs that Caesars Entertainment and CIE have implemented to deter prohibited practices may not be effective in prohibiting their employees, contractors or agents from violating or circumventing such policies and the law. If the employees, contractors or agents of Caesars Entertainment, Planet Hollywood and CIE fail to comply with applicable laws or policies governing its international operations, Growth Partners may face investigations, prosecutions and other legal proceedings and actions which could result in civil penalties, administrative remedies and criminal sanctions. Compliance with international and U.S. laws and regulations that apply to Growth Partners’ international operations increases Growth Partners’ cost of doing business in foreign jurisdictions. Growth Partners also deals with significant amounts of cash in its operations and is subject to various reporting and anti-money laundering regulations. Any determination that Growth Partners or its businesses have violated the FCPA or applicable anti-money laundering laws or regulations could have a material adverse effect on its business, financial condition and operating results.

Growth Partners is subject to extensive governmental regulation and taxation policies, the enforcement of which could adversely impact Growth Partners’ business, financial condition and results of operations.

Growth Partners is subject to extensive gaming regulations and political and regulatory uncertainty. Regulatory authorities in the jurisdictions where Growth Partners operates have broad powers with respect to the licensing of casino operations and may revoke, suspend, condition or limit the gaming or other licenses of Growth Partners’ casino properties or developments, impose substantial fines and take other actions, any one of which could adversely impact Growth Partners’ business, financial condition and results of operations.

Due to CIE’s affiliation with Planet Hollywood, its operations and activities are subject to various gaming laws and laws in Nevada. We also expect CIE to be subject to these or similar laws as CIE seeks licenses for online real money gaming in the United States. For example, CIE has obtained a license in Nevada as an “operator of an interactive gaming system” and expects to obtain regulatory approval to launch online poker in Nevada in 2013. Among these laws are various “suitability” requirements which could limit CIE’s ability to conduct business with certain third parties, make certain acquisitions and otherwise freely conduct its business. The results of such restrictions could have a material adverse effect on CIE’s, and therefore Growth Partners’, business, financial condition and operating results.

From time to time, individual jurisdictions have also considered legislation or referendums, such as bans on smoking in casinos and other entertainment and dining facilities, which could adversely impact the operations of Growth Partners’ casino property. For example, Maryland law prohibits smoking at the Horseshoe Baltimore. The likelihood or outcome of similar legislation in such jurisdictions and referendums in the future cannot be predicted, though any smoking ban would be expected to negatively impact Growth Partners’ financial performance.

The casino entertainment industry represents a significant source of tax revenues to the various jurisdictions in which casinos operate. From time to time, various state and federal legislators and officials have proposed changes in tax laws, or in the administration of such laws, including increases in tax rates, which would affect the industry. If adopted, such changes could adversely impact Growth Partners’ business, financial condition and results of operations.

 

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Acts of terrorism, natural disasters, severe weather and political, economic and military conditions may impede Growth Partners’ ability to operate or harm its financial results.

Terrorist attacks and other acts of war or hostility have created many economic and political uncertainties. For example, a substantial number of the customers of Planet Hollywood use air travel. As a result of terrorist acts, domestic and international travel was severely disrupted, which resulted in a decrease in customer visits to Las Vegas. We cannot predict the extent to which disruptions in air or other forms of travel as a result of any further terrorist act, security alerts or war, uprisings, or hostilities in places such as Iraq and Afghanistan, other countries throughout the world will continue to directly or indirectly impact Growth Partners’ business and operating results. In addition, severe or inclement weather affecting the ability of Planet Hollywood’s customers to travel can have a negative impact on its results of operations.

Political, economic and military conditions may directly affect Growth Partners’ business by impeding its operations or player demand. In particular, a significant portion of the operations and personnel of Playtika, a subsidiary of CIE and the operator of Slotomania, are located in Israel, a country located in a particularly volatile region. Any hostilities, or any future armed conflicts, political or economic instability or violence in the region could have a material adverse effect on CIE’s, and therefore Growth Partners’, business, financial condition and operating results.

Risks Related to Growth Partners’ Interactive Entertainment Business

One game has historically generated the majority of CIE’s revenue, and CIE must continue to launch and enhance games that attract and retain a significant number of players in order to grow its revenue and sustain its competitive position.

Historically, CIE has depended on one game for the majority of its revenue and we expect that this dependency will likely continue for the foreseeable future. Specifically, Slotomania accounted for 70% of CIE’s social and mobile online game revenue for the three months ended March 31, 2013 and 68% of CIE’s total revenue for the three months ended March 31, 2013. CIE’s growth depends on its ability to increase interest in its key established game, Slotomania, by continually enhancing the game. Additionally, CIE must launch new games that achieve significant popularity. Each of CIE’s games requires significant engineering, marketing and other resources to develop, launch and sustain via regular upgrades and expansions, and such costs on average have increased and are likely to continue to increase in the future. CIE’s ability to successfully launch, sustain and expand games and attract and retain players largely depends on its ability to:

 

   

anticipate and effectively respond to changing player interests and preferences;

 

   

anticipate and respond to changes in the competitive landscape, including any future legalization of online real money gaming in the United States and other jurisdictions;

 

   

attract, retain and motivate talented game designers, product managers and engineers;

 

   

develop, sustain and expand games that are fun, interesting and compelling to play;

 

   

effectively market new games and enhancements to CIE’s existing players and new players;

 

   

develop and implement new content features in its games;

 

   

minimize launch delays and cost overruns on new games and game expansions;

 

   

minimize downtime and other technical difficulties; and

 

   

acquire high quality assets, personnel and companies.

It is difficult to consistently anticipate player demand on a large scale, particularly as CIE develops new games in new markets, including international markets and mobile platforms. If CIE does not successfully launch and sustain games that attract and retain a significant number of players and extend the life of CIE’s existing games, it could have a material adverse effect on CIE’s, therefore Growth Partners’, business, financial condition and operating results.

 

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If CIE’s top game, Slotomania, does not maintain its popularity, CIE’s results of operations could be harmed.

In addition to creating new games that are attractive to a significant number of players, CIE must extend the life of its games, in particular its most successful game, Slotomania. For a game to remain popular, CIE must routinely enhance, expand and/or upgrade the game with new features and content that players find attractive. Such enhancement requires the investment of significant resources, integration into new platforms, introduction of new languages, expansion into new jurisdictions and often presents new marketing and other challenges. CIE may not be able to successfully enhance, expand or upgrade CIE’s current library of games. Any decrease in the popularity of CIE’s social and mobile games, or any other adverse developments relating to CIE’s most popular game, Slotomania, could have a material adverse effect on its, and therefore Growth Partners’, business, financial condition and operating results.

CIE relies on a small portion of its total players for nearly all of its revenue from social and mobile games and if CIE fails to grow or sustain its player base, its results of operations could be adversely affected.

Consistent with the social and mobile games business model, only a small portion of CIE’s social and mobile games players pay for virtual goods. During the fourth quarter of 2012, CIE’s social and mobile games business had approximately 0.20 million average Monthly Unique Payers, or 1.2% of the total number of CIE’s average Monthly Unique Users on its social and mobile platforms. In order to sustain and increase CIE’s revenue levels, CIE must attract, retain and increase the number of players that are payers. To retain players, CIE must devote significant resources so that the games they play retain their interest and attract them to CIE’s other games. If CIE fails to grow or sustain its player base, or if the rates at which CIE attracts and retain players declines or if the average amount of revenue CIE receives from its players declines, it could have a material adverse effect on CIE’s, therefore Growth Partners’, business, financial condition and operating results.

The social and mobile games industry is new and rapidly changing, which makes it difficult to evaluate CIE’s business and prospects.

Social and mobile games, from which Growth Partners derived 97% of its revenue in its Interactive Entertainment business for the three months ended March 31, 2013, is a new and rapidly evolving industry. The growth of the industries and the level of demand and market acceptance of CIE’s games are subject to a high degree of uncertainty. CIE’s future operating results will depend on numerous factors affecting the social and mobile games industry, many of which are beyond CIE’s control, including, among others:

 

   

the occurrence and manner of legalization of online real money gaming in the United States beyond Nevada, Delaware and New Jersey;

 

   

continued worldwide growth in the adoption and use of Facebook, other social networks and mobile platforms;

 

   

changing rules and requirements on social networks, like Facebook and mobile platforms, like Android and iOS;

 

   

changes in consumer demographics and public tastes and preferences;

 

   

changing laws and regulations affecting social and mobile games;

 

   

the availability and popularity of other forms of entertainment;

 

   

the worldwide growth of personal computer, broadband Internet and mobile device users, and the rate of any such growth; and

 

   

general economic conditions, particularly economic conditions adversely affecting discretionary consumer spending.

CIE’s ability to plan for game development, distribution and promotional activities will be significantly affected by its ability to anticipate and adapt to relatively rapid changes in the tastes and preferences of its current

 

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and potential players. New and different types of entertainment may increase in popularity at the expense of social and mobile games. A decline in the popularity of social or mobile games in general, or CIE’s games in particular, could have a material adverse effect on its, and therefore Growth Partners’, business, financial condition and operating results.

CIE has a new business model and a short operating history, which makes it difficult to evaluate its prospects and future financial results and may increase the risk that it will not be successful.

The CIE’s business was formed in May 2009, and CIE’s business changed significantly with the acquisition of Playtika in 2011. Consequently, CIE has a short operating history and a new business model, both of which make it difficult to effectively assess its future prospects. Today, CIE’s business model is largely based on offering games that are free to play on social and mobile platforms, regulated online real money gaming in the UK and its WSOP sponsorship and licensing businesses. However, we expect CIE’s business model to change as it implements its online poker business in Nevada and other states once legalized. Moreover, to date, CIE’s social and mobile games business only earns revenue from a small portion of its players. In addition, CIE’s experience in the complex business of online real money gaming is limited. CIE’s future prospects are particularly difficult to assess because it has derived the majority of its historical revenue from its acquisition of Playtika in 2011. You should consider CIE’s business and prospects in light of the challenges it faces, any one, or the combination, of which could have material adverse effect on CIE’s, and therefore Growth Partners’, business, financial condition and operating results.

The low barriers to entry and intense competition that characterizes the social and mobile games industry could have an adverse effect on CIE’s, and therefore Growth Partners’, business financial condition and results of operations.

The social and mobile games industry has low barriers to entry and we expect more companies to enter the sector and a wider range of social and mobile games to be introduced. Even today, the industry is highly competitive. CIE’s competitors that develop social and mobile games vary in size and include publicly traded companies such as Zynga Inc. (“Zynga”), Glu Mobile, International Game Technology (“IGT”) and Electronic Arts and privately held companies such as Midasplayer.com Limited (operators of King.com). In addition, online game developers and distributors who are primarily focused on specific international markets, such as Tencent Holdings Limited in Asia, and high-profile companies with significant online presences that to date have not developed social and mobile games, such as Amazon.com, Inc., Apple Inc., Facebook, Google Inc. (“Google”), Microsoft and Yahoo! Inc., may decide to develop social and mobile games in the future. Some of these current and potential competitors have significant resources for developing or acquiring additional games, may be able to incorporate their own highly recognized brands and assets into their games, have a more diversified set of revenue sources than CIE currently does and may be less severely affected by changes in consumer preferences, regulations or other developments that may impact the social and mobile games industry. As CIE continues to devote significant resources to developing games for social and mobile platforms, CIE will face significant competition from established companies that may have far greater experience than CIE, including Zynga and Electronic Arts. Moreover, there exists in the social and mobile games industry a significant “first mover” advantage. CIE’s ability to compete effectively in respect to a particular style of game may be premised on introducing a game in that style before CIE’s competitors. Although we believe CIE is currently able to compete effectively in each of the various markets in which CIE participates, we cannot assure you that CIE will be able to continue to do so or that CIE will be capable of maintaining or further increasing its current market share. CIE’s failure to compete successfully in its various markets could have a material adverse effect on CIE’s, and therefore Growth Partners’, business, financial condition and results of operations.

If CIE fails to effectively manage its growth, CIE’s, and therefore Growth Partners’, business and operating results could be harmed.

CIE continues to experience rapid growth in its headcount and operations, which will continue to place significant demands on its management and operational, financial and technological infrastructure. As of

 

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March 31, 2013, approximately 66% of CIE’s employees had been with CIE for less than one year and approximately 83% for less than two years. Moreover, a number of the individuals CIE relies on for its operations are consultants, not full-time employees on CIE’s payroll. As CIE continues to grow, it must expend significant resources to identify, hire, integrate, develop and motivate a large number of qualified employees. If CIE fails to effectively manage its hiring needs and successfully integrate its new hires, CIE’s ability to continue launching new games and enhance existing games could suffer.

To effectively manage the growth of CIE’s business and operations, it will need to continue spending significant resources to improve its technology infrastructure, its operational, financial and management controls, and its reporting systems and procedures by, among other things:

 

   

monitoring and updating CIE’s technology infrastructure to maintain high performance and minimize down time;

 

   

enhancing information and communication systems to ensure that CIE’s employees and offices around the world are well-coordinated and can effectively communicate with each other; and

 

   

appropriately documenting CIE’s information technology systems and business processes.

If CIE fails to successfully do these things, it could have a material adverse effect on its, and therefore Growth Partners’, business, financial condition and operating results.

CIE’s growth prospects will suffer if it is unable to develop successful games for new and emerging platforms.

We expect CIE to devote substantial resources to the development of its social online and mobile games on new and emerging platforms, and its limited experience makes it difficult to know whether CIE will succeed in developing such games that appeal to players or advertisers on such new and emerging platforms. The uncertainties CIE faces include:

 

   

its experience in developing social games for use primarily on Facebook and iOS may not be relevant for developing games for new and emerging platforms;

 

   

many new and emerging platforms are located in countries where CIE has no or limited operating experience;

 

   

new and emerging platforms may require different technological requirements to adapt CIE’s games than its current platforms, which may require significant expense;

 

   

CIE has limited experience working with wireless carriers, new and emerging platform providers and other partners whose cooperation CIE may need in order to be successful; and

 

   

CIE will need to move beyond payment methods provided by social networks and successfully allow for a variety of payment methods and systems based on new mobile platforms, geographies and other factors.

These and other uncertainties make it difficult to know whether CIE will succeed in developing commercially viable games for new and emerging social and mobile platforms. If CIE does not succeed in doing so, it could have a material adverse effect on its, therefore Growth Partners’, business, financial condition and operating results.

If CIE is unable to maintain a good relationship with Facebook, Apple and/or Google, or if either Facebook, Apple or Google were to change their respective terms of service in ways unfavorable to CIE, CIE’s business may suffer.

Facebook, iOS and Android are significant distribution, marketing, promotion and payment platforms for CIE’s games. In the first quarter of 2013, CIE generated approximately 96% of its social and mobile games

 

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revenue and 88% of its social and mobile games users through the Facebook, iOS and Android platforms and we expect CIE to continue to do so for the foreseeable future. CIE is subject to Facebook’s, Apple’s and Google’s respective standard terms and conditions for application developers, which govern the promotion, distribution and operation of games and other applications on the Facebook, iOS and Android platforms.

CIE has benefited from Facebook’s, Apple’s and Google’s strong brand recognition and large user bases. If Facebook, iOS and/or Google loses its market position or otherwise falls out of favor with Internet users, CIE would need to identify alternative channels for marketing, promoting and distributing CIE’s social and mobile games, which would consume substantial resources and may not be effective. In addition, Facebook, Apple and Google each have broad discretion to change their respective terms of service and other policies, without CIE’s consent and without notice, with respect to CIE and other developers, and those changes may be unfavorable to CIE. Facebook, Apple and/or Google may also change their respective fee structures, add fees associated with access to and use of the Facebook, iOS and Android platforms, change how the personal information of their respective users is made available to application developers on the Facebook, iOS or Android platforms, restrict how Facebook, iOS or Android users can share information with friends on their respective platforms, restrict or discontinue access for consumers from certain countries, discontinue or limit access to their respective platforms by CIE and other game developers or develop their own competitive offerings. If any of these events were to materialize, it could have a material adverse effect on CIE’s, and therefore Growth Partners’, business, financial condition and operating results.

The loss of the services of key personnel at CIE could have a material adverse effect on its business.

The leadership of CIE’s chief executive officer, Mitch Garber, and other executive officers has been a critical element of its success. The death or disability of Mitch Garber or other extended or permanent loss of his services, or any negative market or industry perception with respect to him or arising from his loss, could have a material adverse effect on its, therefore Growth Partners’, business. CIE’s other executive officers and other members of senior management, including Robert Antokol and Uri Shahak, co-founders of Playtika, have substantial experience and expertise in the social and mobile games industry and have made significant contributions to CIE’s growth and success. The unexpected loss of services of one or more of these individuals could have a material adverse effect on CIE’s, and therefore Growth Partners’, business, financial condition and operating results. CIE is not protected by key man or similar life insurance covering members of its senior management. CIE has employment agreements with certain of its executive officers, but these agreements do not guarantee that any given executive will remain with CIE.

If CIE is unable to attract, retain and motivate employees, it may not be able to compete effectively and may not be able to successfully expand its businesses.

CIE’s success and ability to grow are dependent, in part, on its ability to hire, retain and motivate sufficient numbers of talented people, with the increasingly diverse skills needed to serve and expand its business. Such employees, particularly game designers, product managers and engineers, are in high demand, and CIE devotes significant resources to identifying, hiring, training, integrating and retaining these employees. These efforts place significant demands on CIE’s resources. Historically, CIE has hired a number of key personnel through strategic acquisitions, such as our acquisition of Playtika, and as competition with other social and mobile games companies increases CIE may incur significant expenses in continuing this practice. The inability to attract qualified employees in sufficient numbers to meet particular demands or the loss of a significant number of CIE’s employees could have a material adverse effect on CIE’s, therefore Growth Partners’, business, financial condition and operating results.

Expansion into international markets is important for CIE’s growth, and as CIE expands internationally it faces additional business, political, regulatory, operational, financial and economic risks, any of which could increase its costs and hinder its growth.

Continuing to expand CIE’s business to attract players in countries other than the United States is a critical element of CIE’s business strategy. An important part of targeting international markets is developing offerings that

 

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have localized content and are customized for the players in those markets. We expect to continue to devote significant resources to international expansion through acquisitions, the establishment of additional offices and development studios, and increasing CIE’s foreign language strategic offerings. CIE’s ability to expand its business and to attract talented employees and players in an increasing number of international markets requires considerable management attention and resources and is subject to the particular challenges of supporting a rapidly growing business in an environment of multiple languages, cultures, customs, legal systems, alternative dispute systems, regulatory systems and commercial infrastructures. Expanding CIE’s international focus may subject it to risks that it has not faced before or increase risks that CIE currently faces, including risks associated with:

 

   

recruiting and retaining talented and capable management and employees in foreign countries;

 

   

challenges caused by distance, language and cultural differences;

 

   

developing and customizing games and other offerings that appeal to the tastes and preferences of players in international markets;

 

   

competition from local game makers with significant market share in those markets and with a better understanding of local player preferences;

 

   

protecting and enforcing CIE’s intellectual property rights;

 

   

negotiating agreements with local distribution platforms that are economically beneficial to CIE and protective of its rights;

 

   

the inability to extend proprietary rights in CIE’s brand, content or technology into new jurisdictions;

 

   

implementing alternative payment methods for virtual goods in a manner that complies with local laws and practices and protects CIE from fraud;

 

   

compliance with applicable foreign laws and regulations, including privacy laws and laws relating to content;

 

   

compliance with anti-bribery laws, including, without limitation, compliance with the FCPA;

 

   

credit risk and higher levels of payment fraud;

 

   

currency exchange rate fluctuations;

 

   

protectionist laws and business practices that favor local businesses in some countries;

 

   

foreign tax consequences, including the requirement to pay value added tax, or VAT, in certain jurisdictions;

 

   

foreign exchange controls or U.S. tax restrictions that might restrict or prevent CIE from repatriating income earned in countries outside the United States; and

 

   

political, economic and social instability.

Entering new international markets will be expensive, CIE’s ability to successfully gain market acceptance in any particular market is uncertain and the distraction of CIE’s senior management team could mean that it is unable to capitalize on other strategic opportunities. If CIE is unable to successfully expand into new international markets, it could have a material adverse effect on CIE’s, therefore Growth Partners’, business, financial condition and operating results.

The value of CIE’s virtual goods is highly dependent on how CIE manages the economies in its games. If CIE fails to manage its game economies properly, its business may suffer.

Players from whom CIE derives revenue purchase virtual goods in CIE’s games because of the perceived value of these goods, which is dependent on the relative ease of securing an equivalent good via non-paid means within the game. The perceived value of these virtual goods can be impacted, for instance, by an increase in the

 

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availability of free or discounted Facebook Credits or by various actions that CIEs take in the games, including offering discounts for virtual goods, giving away virtual goods in promotions or providing easier non-paid means to secure these goods. If CIE fails to manage its virtual economies properly, players may be less likely to purchase virtual goods, which could have a material adverse effect on its, and therefore Growth Partners’, business, financial condition and operating results.

The proliferation of hacking, security breaches, computer malware, “cheating” programs and scam offers that seek to exploit CIE’s games and players affects the game-playing experience and may lead players to stop playing CIE’s games.

Security breaches, computer malware and computer hacking attacks have become more prevalent in CIE’s industry and may occur on its systems in the future. Because of CIE’s prominence in the social and mobile game industry, CIE’s affiliation with one of the largest gaming entertainment companies in the world, and because of the prominence of the brands CIE uses in its businesses, including Caesars, WSOP, Slotomania and Bingo Blitz, we believe CIE is a particularly attractive target for hackers. Though it is difficult to determine what harm may exactly result from any specific interruption or breach, any failure to maintain performance, reliability, security and availability of CIE’s network infrastructure to the satisfaction of its players may harm CIE’s reputation and its ability to retain existing players and attract new players. CIE is particularly exposed to these risks in its online real money gaming business where players place an especially high value on the proper functioning of CIE’s games. Any security breach caused by hacking, which involves efforts to gain unauthorized access to information or systems, or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, and the inadvertent transmission of computer viruses could have a material adverse effect on CIE’s, and therefore Growth Partners’, business, financial condition and operating results.

Unrelated third parties have developed, and may continue to develop, “cheating” programs and activities that enable players to exploit CIE’s games, play them in an automated way or obtain unfair advantages over other players who do play fairly, including through the unauthorized sale of CIE’s virtual goods. These programs and activities harm the experience of players who play fairly and may disrupt the real money operations and virtual economies of CIE’s games. CIE devotes significant resources to discover and disable these programs and activities, but if CIE is unable to do so quickly its operations may be disrupted, its reputation damaged and players may stop playing its games. This may lead to lost revenue from paying players, increased cost of developing technological measures to combat these programs and activities, legal claims relating to the diminution in value of CIE’s real money gaming credits, virtual currency and increased customer service costs needed to respond to dissatisfied players.

CIE is subject to payment-related risks, such as risk of fraudulent use of credit or debt cards, which could have adverse effects on CIE’s business or results of operations due to unusually large or frequent chargebacks from customers.

CIE accepts payments using a variety of methods, including PayPal, credit and debit cards and Facebook Credits. As CIE continues to introduce new payment options to its players, CIE may be subject to additional regulatory and compliance requirements. CIE also may be subject to the risk of fraudulent use of credit or debit cards, or other payment options. For certain payment methods, including credit and debit cards and Facebook Credits, CIE pays interchange and other fees, which may increase over time and, therefore, raise operating costs and reduce profitability. CIE relies on third parties to provide payment processing services (including Facebook) and it could disrupt CIE’s business if these companies become unwilling or unable to provide these services to CIE. CIE is also subject to rules and requirements governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for CIE to comply. If CIE fails to comply with these rules or requirements, CIE may be subject to fines and higher transaction fees and lose its ability to accept PayPal, credit card, debit card, Facebook Credits or other payments from consumers which could have a material adverse effect on its, and therefore Growth Partners’, business, financial condition and operating results. In addition, depending on the merchant category code assigned to CIE by the credit card associations, especially for its online real money gaming business, CIE may be subject to a higher percentage of declined transactions which could reduce the amount of money deposited.

 

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Chargebacks occur when customers seek to void credit card or other payment transactions. Cardholders are intended to be able to reverse card transactions only if there has been unauthorized use of the card or the services contracted for have not been provided. In CIE’s business, players occasionally seek to reverse their online real money gaming losses or purchases of virtual goods through chargebacks. Although CIE places great emphasis on control procedures to protect from chargebacks, these control procedures may not be sufficient to protect CIE from adverse effects on its business or results of operations due to unusually large or frequent chargebacks.

Programming errors or flaws in CIE’s social and mobile games, or on its regulated online real money gaming websites, could harm CIE’s reputation or decrease market acceptance of CIE’s games, which could have a material adverse effect on its, and therefore Growth Partners’, business, financial condition and operating results.

CIE’s social and mobile games, and its regulated online real money gaming websites, may contain errors, bugs, flaws or corrupted data, and these defects may only become apparent after their launch, particularly as CIE launches new games and rapidly releases new features to existing games under tight time constraints. We believe that if CIE’s players have a negative experience with its games, they may be less inclined to continue or resume playing CIE’s games or recommend its games to other potential players. Undetected programming errors, game defects and data corruption can disrupt CIE’s operations, adversely affect the game experience of CIE’s players by allowing players to gain unfair advantage, harm CIE’s reputation, cause CIE’s players to stop playing its games, divert CIE’s resources and delay market acceptance of CIE’s games, any of which could have a material adverse effect on its, and therefore Growth Partners’, business, financial condition and operating results.

Companies and governmental agencies may restrict access to Facebook, CIE’s websites or the Internet generally, which could lead to the loss or slower growth of CIE’s player base.

CIE’s online players need to access the Internet to play CIE’s games. Companies and governmental agencies could block access to the Internet generally or the particular platform on which a player wishes to play CIE’s games (e.g., Facebook) for a number of reasons such as security or confidentiality concerns or regulatory reasons, or they may adopt policies that prohibit employees from accessing Facebook, CIE’s website, CIE’s online gaming websites or other social platforms for work related efficiency reasons. For example, the government of the People’s Republic of China has blocked access to Facebook in China and, according to a recent article in The Wall Street Journal, Proctor & Gamble recently implemented a policy restricting employee access to a number of popular entertainment websites. If companies or governmental entities block or limit access to Facebook, CIE’s website, CIE’s online gaming websites or otherwise adopt policies restricting players from playing CIE’s games, it could have a material adverse effect on CIE’s, and therefore Growth Partners’, business, financial condition and operating results.

Evolving regulations concerning data privacy may result in increased regulation and different industry standards, which could prevent CIE from providing its current games to its players or require CIE to modify its games, thereby harming its business.

The regulatory framework for privacy issues worldwide is currently in flux and is likely to remain so for the foreseeable future. Practices regarding the collection, use, storage, transmission and security of personal information by companies operating over the Internet and mobile platforms have recently come under increased public scrutiny. The U.S. government, including the Federal Trade Commission and the Department of Commerce, has announced that it is reviewing the need for greater regulation for the collection of information concerning consumer behavior on the Internet, including regulation aimed at restricting certain targeted advertising practices. In addition, the European Union is in the process of proposing reforms to its existing data protection legal framework, which may result in a greater compliance burden for companies with users in Europe. Various government and consumer agencies have also called for new regulation and changes in industry practices.

 

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CIE’s business, including its ability to operate and expand internationally, could be adversely affected if laws or regulations are adopted, interpreted or implemented in a manner that is inconsistent with CIE’s current business practices and that require changes to these practices, the design of CIE’s website, games, features or its privacy policy. In particular, the success of CIE’s business has been, and we expect will continue to be, driven by CIE’s ability to responsibly use the data that CIE’s players share with it. Therefore, CIE’s business could be harmed by any significant change to applicable laws, regulations or industry practices regarding the use or disclosure of data CIE’s players choose to share with it, or regarding the manner in which the express or implied consent of consumers for such use and disclosure is obtained. Such changes may require CIE to modify its games and features, possibly in a material manner, and may limit CIE’s ability to develop new games and features that make use of the data that CIE’s players voluntarily share with it.

CIE’s business is subject to a variety of other U.S. and foreign laws, many of which are unsettled and still developing and which could subject CIE to claims or otherwise harm its business.

It is possible that a number of laws and regulations may be adopted or construed to apply to CIE in the United States and elsewhere that could restrict the social and mobile industry, including player privacy, advertising, taxation, content suitability, copyright, distribution and antitrust. For example, certain jurisdictions in the United States and elsewhere may deem CIE’s social and mobile games to be gambling or marketing gambling to underaged persons and therefore in violation of the laws of such jurisdictions. Furthermore, the growth and development of electronic commerce and virtual goods may prompt calls for more stringent consumer protection laws that may impose additional burdens on companies such as CIE conducting business through the Internet and mobile devices. We anticipate that scrutiny and regulation of CIE’s industry will increase and that CIE will be required to devote legal and other resources to address such regulation. For example, existing laws or new laws regarding the regulation of currency and banking institutions may be interpreted to cover real money gaming credits, virtual currency or virtual goods. If that were to occur CIE may be required to seek licenses, authorizations or approvals from relevant regulators, the granting of which may be dependent on CIE meeting certain capital and other requirements and CIE may be subject to additional regulation and oversight, all of which could significantly increase CIE’s operating costs. Changes in current laws or regulations or the imposition of new laws and regulations in the United States or elsewhere regarding these activities may lessen the growth of social or mobile games or online real money gaming services and impair CIE’s business.

Any failure to protect CIE’s trademarks or other intellectual property could have a negative impact on the value of CIE’s brand names and adversely affect its business.

The development of intellectual property is part of CIE’s overall business strategy and CIE regards its intellectual property to be an important element of its success. For example, CIE owns and manages the WSOP tournaments and circuit, and CIE licenses or sublicenses trademarks for a variety of products and businesses related to this brand. CIE also owns the Slotomania brand. CIE seeks to establish and maintain its proprietary rights in its business operations and technology through the use of patents, copyrights, trademarks and trade secret laws. CIE files applications for and obtain copyrights and trademarks in the United States and in foreign countries where CIE believes filing for such protection is appropriate. CIE also seeks to maintain its trade secrets and confidential information by nondisclosure policies and through the use of appropriate confidentiality agreements. Despite CIE’s efforts to protect its proprietary rights, parties may infringe its copyrights and trademarks and use information that CIE regards as proprietary and CIE’s rights may be invalidated or unenforceable. In addition, parties may challenge CIE’s copyright or trademark applications in the United States or other jurisdictions. The laws of some foreign countries do not protect proprietary rights to as great an extent as do the laws of the United States. Monitoring the unauthorized use of CIE’s intellectual property is difficult. Litigation may be necessary to enforce CIE’s intellectual property rights or to determine the validity and scope of the proprietary rights of others. Litigation of this type could result in substantial costs and diversion of CIE’s resources. The unauthorized use or reproduction of CIE’s trademarks could diminish the value of its brand and its market acceptance, competitive advantages or goodwill, which could have a material adverse effect on CIE’s, therefore Growth Partners’, business, financial condition and operating results.

 

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In the future, it is possible that CIE will face allegations that it has infringed the trademarks, copyrights, patents and other intellectual property rights of third parties, including from its competitors, non-practicing entities and former employers of its personnel. Patent and other intellectual property litigation may be protracted and expensive, and the results are difficult to predict. As the result of any court judgment or settlement, CIE may be obligated to cancel the launch of a new game, stop offering certain features, pay royalties or significant settlement costs, purchase licenses or modify its games and features while it develops substitutes.

The Leahy-Smith America Invents Act (the “Leahy-Smith Act”), was adopted in September 2011. The Leahy-Smith Act includes a number of significant changes to United States patent law, including provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. The United States Patent and Trademark Office is currently developing regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act will not become effective until up to 18 months after its enactment. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of CIE’s business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of CIE’s patent applications and the enforcement or defense of its issued patents, all of which could harm its business.

CIE’s business strategy is premised, in part, on the legalization of online real money gaming in the United States and its ability to predict and capitalize on any such legalization.

In the last few years, California, Florida, Mississippi, Hawaii, Massachusetts, New Jersey, Iowa, Illinois, Washington D.C. and the Federal government have considered legislation that would legalize online real money gaming. To date, only Nevada, Delaware and New Jersey have enacted such legislation. If a large number of additional states or the Federal government fail to enact online real money gaming legislation or CIE is unable to obtain the necessary licenses to operate online real money gaming websites in United States jurisdictions where such games are legalized, CIE’s future growth could be materially impaired as CIE would be limited to offering online real money gaming to players in jurisdictions outside the United States where legal. In addition, states or the Federal government may legalize online real money gaming in a manner that is unfavorable to CIE. For example, several states and the Federal government are considering draft laws that require online casinos to also have a license to operate a brick-and-mortar casino, either directly or indirectly through an affiliate. If, like Nevada and New Jersey, U.S. jurisdictions enact legislation legalizing real money casino gaming subject to this brick-and-mortar requirement, CIE may be unable to offer online real money gaming in such jurisdictions if CIE is unable to establish an affiliation with a brick-and-mortar casino in such jurisdiction. If, however, legislation is enacted legalizing real money casino gaming without this requirement, CIE would lose its advantage over some of its potential competitors that do not have an affiliate with a brick-and-mortar casino operation. The loss of this or other similar advantages CIE receives as an affiliate of Caesars Entertainment could materially impair its ability to grow its online real money gaming business in the future.

There also exists in the online real money gaming industry a significant “first mover” advantage. CIE’s ability to compete effectively in respect of a particular style of online real money gaming in the United States may be premised on introducing a style of gaming before its competitors. CIE’s failure to do so could materially impair its ability to grow its online real money gaming business in the future.

In addition to the risk that online real money gaming will be legalized in a manner unfavorable to CIE, CIE may fail to accurately predict when online real money gaming will be legalized in significant jurisdictions. The legislative process in each U.S. state and at the Federal level is unique and capable of rapid, often unpredictable change. If CIE fails to accurately forecast when and how, if at all, online real money gaming will be legalized in additional U.S. jurisdictions, such failure could impair CIE’s readiness to introduce online real money gaming offerings in such jurisdictions, which could have a material adverse effect on CIE’s, and therefore Growth Partners’, business, financial condition and operating results.

 

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Nevada, Delaware and New Jersey are the only U.S. jurisdictions that have affirmatively legalized online real money gaming and are small jurisdictions that may not yield significant revenue. CIE has obtained regulatory approval to offer online real money gaming in Nevada, but still require approval for software, and the process for obtaining regulatory approval to offer online real money gaming in Delaware and New Jersey is uncertain.

Nevada, Delaware and New Jersey are the only U.S. jurisdictions that have enacted legislation legalizing online real money gaming. Both Nevada and Delaware are relatively small jurisdictions in terms of population compared to the rest of the United States and there may be significant competition for online real money gaming in these jurisdictions, and as a result, CIE may not be able to obtain a significant amount of revenue once CIE is permitted to operate in these jurisdictions.

Although CIE has obtained a license to operate online real money gaming websites in Nevada, CIE has yet to receive approval of its software. The process for obtaining regulatory approval to operate online real money gaming websites in Delaware and New Jersey are currently being determined. If other U.S. jurisdictions fail to affirmatively legalize online real money gaming or CIE is unsuccessful in obtaining the required approval in Nevada and licenses to offer online real money gaming in Delaware and New Jersey or other U.S. jurisdictions in which CIE chooses to operate and online real money gaming becomes legal, CIE’s revenues for United States online real money gaming may be less than we expect, which could have a material adverse effect on CIE’s, and therefore Growth Partners’, business, financial condition and operating results.

Individuals may seek to participate in online real money gaming in jurisdictions where it is illegal. If CIE is unsuccessful in blocking such individuals, CIE may suffer legal penalties or an impairment of its ability to offer online real money gaming in general.

Individuals in jurisdictions in which online real money gaming is illegal may nonetheless seek to engage CIE’s online real money gaming offerings. While CIE will take steps to block access by individuals in such jurisdictions, those steps may be unsuccessful. In the event that individuals in jurisdictions in which online real money gaming is illegal engage CIE’s online real money gaming offerings, CIE may be subject to criminal sanctions, regulatory penalties, the loss of existing or future licenses necessary to offer online real money gaming or other legal liabilities, any one of which could have a material adverse effect on CIE’s, and therefore Growth Partners’, business, financial condition and operating results. For example, gambling laws and regulations in many jurisdictions require gaming industry participants to maintain strict compliance with various laws and regulations. If CIE is unsuccessful in blocking access to its online real money gaming offerings by individuals in a jurisdiction where such offerings are illegal, CIE could lose or be prevented from obtaining a license necessary to offer online real money gaming in a jurisdiction in which such offerings are legal and Growth Partners’ other gaming licenses may be materially impacted.

Social and mobile games may become subject to regulation in certain jurisdictions, which could increase CIE’s compliance costs or limit the number of jurisdictions in which CIE is able to offer social and mobile games.

Certain jurisdictions may seek to regulate social and mobile games. For example, the UK Gambling Commission recently publically indicated that it will consider whether to regulate social and mobile games in the future. If the UK or another jurisdiction important to CIE’s social and mobile games business regulates social and mobile games, CIE could incur additional costs associated with compliance with such regulation or, depending on the nature of the regulation, CIE could be prohibited from providing social and mobile games in such jurisdictions altogether. As social and mobile games constitute a significant component of CIE’s business model, such new compliance costs or jurisdictional restrictions on its ability to offer social and mobile games could have a material adverse effect on CIE’s, and therefore Growth Partners’, business, financial condition and operating results.

 

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CIE is dependent on a small number of third-parties for its online real money gaming platforms and its development of its social and mobile games.

CIE contracts with a small number of third-party partners to develop, launch and maintain its software platforms for online real money gaming, including its relationship with 888. In addition, CIE is dependent on Orneon for the development of CIE’s social and mobile games. Under CIE’s Management Services Agreement with Orneon, CIE pays Orneon a monthly fee and, in return, Orneon develops, launches and maintains various social and mobile games for CIE on a “work for hire” basis, such that CIE owns the intellectual property created by Orneon that constitutes the various social and mobile games. The Management Services Agreement expires in April 2014, unless CIE terminates it earlier by paying Orneon an additional fee that decreases as the expiration date approaches. Orneon was recently purchased by bwin.party, CIE’s competitor in online real money gaming. This could increase the risk that Orneon will not be willing to renew CIE’s agreement when it expires in April 2014. A termination of these services by any of these third-parties could cause disruption of CIE’s business and could increase future costs for such services. If, in the future, these third-parties choose not to provide such services to CIE on terms acceptable to it, CIE will have to seek alternative means of securing comparable services, which may be on terms that are not as favorable as the current terms. Furthermore, the termination of these services by any of these third-parties could delay the launch of CIE’s real money online poker operations in the United States if such operations are legalized or any of its social or mobile games under development. For example, if CIE’s agreement with 888 related to online gaming services in the United States were to be breached, CIE would not be able to offer online poker in Nevada as planned on the expected timetable. The occurrence of such events could have a material adverse effect on CIE’s, and therefore Growth Partners’, business, financial condition and operating results.

The enactment of legislation implementing changes in the U.S. taxation of international business activities, a change in the application of the tax laws of various jurisdictions or the adoption of other tax reform policies could materially impact CIE’s financial position and results of operations.

The Obama administration has made public statements indicating that it has made international tax reform a priority, and key members of the U.S. Congress have conducted hearings and proposed legislation in the past that addresses several international tax issues. Recent changes to U.S. tax laws, including limitations on the ability of taxpayers to claim and utilize foreign tax credits and the deferral of certain tax deductions until earnings outside of the United States are repatriated to the United States, as well as changes to U.S. tax laws that may be enacted in the future, could impact the tax treatment of CIE’s foreign earnings. Due to the large and expanding scale of CIE’s international business activities, any changes in the U.S. taxation of such activities may increase CIE’s worldwide effective tax rate and harm CIE’s financial position and results of operations. Additionally, any increase or changes in taxes in other countries where CIE has significant operations, such as Israel, could harm CIE’s financial position and results of operations.

Moreover, CIE’s corporate structure and intercompany arrangements, including the manner in which CIE develops and uses its intellectual property and the transfer pricing of its intercompany transactions, are intended to provide CIE worldwide tax efficiencies. The application of the tax laws of various jurisdictions, including the United States, to CIE’s international business activities is subject to interpretation and depends on CIE’s ability to operate its business in a manner consistent with its corporate structure and intercompany arrangements. The taxing authorities of the jurisdictions in which CIE operates may challenge CIE’s methodologies for valuing developed technology or intercompany arrangements, including CIE’s transfer pricing, or determine that the manner in which CIE operates its business is not consistent with the manner in which CIE reports its income to the jurisdictions, which could increase CIE’s worldwide effective tax rate and harm its financial position and results of operations.

 

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CIE will no longer be a member of Caesars Entertainment’s consolidated group for U.S. federal income tax purposes, which will trigger intercompany gains between CIE and Caesars Entertainment or other members of Caesars Entertainment’s consolidated group. CIE could be liable for taxes owed by Caesars Entertainment for periods prior to the date CIE became deconsolidated including with respect to the intercompany gains.

Following the closing of the rights offering, Caesars Entertainment will no longer own 80% or more of the common stock of CIE, and therefore, under U.S. federal income tax laws, CIE will cease to be a member of Caesars Entertainment’s consolidated group for U.S. federal income tax purposes. The triggering of deferred intercompany gains between CIE and Caesars Entertainment or other members of Caesars Entertainment’s consolidated group will result in the realization of a gain for Caesars Entertainment with respect to the WSOP assets that CIE acquired from CEOC and its subsidiaries.

After its deconsolidation from Caesars Entertainment’s consolidated group, CIE will be the parent of a new consolidated group for U.S. federal income tax purposes. Pursuant to the terms of the tax matters agreement between CIE and Caesars Entertainment (the “Tax Matters Agreement”), however, CIE may be required to make payments to Caesars Entertainment in respect of taxes owed by Caesars Entertainment for periods prior to the date CIE became deconsolidated. In addition, under U.S. federal income tax laws, each member of a consolidated group is liable for the consolidated group’s entire tax obligation. Therefore, to the extent that Caesars Entertainment, or other members of Caesars Entertainment’s consolidated group, fail to make any U.S. federal income tax payments required by law attributable to periods during which CIE was a member of Caesars Entertainment’s consolidated group, CIE could be liable for the shortfall. Similar principles may apply for foreign, state or local income tax purposes where CIE filed combined, consolidated or unitary returns with Caesars Entertainment or its subsidiaries for foreign, state or local income tax purposes.

Risks Related to Growth Partners’ Casino Properties and Developments Business

Growth Partners’ Casino Properties and Developments business is particularly sensitive to reductions in discretionary consumer spending resulting from downturns in the economy or other factors.

Changes in discretionary consumer spending or consumer preferences are driven by factors beyond Growth Partners’ control, such as perceived or actual general economic conditions; high energy, fuel and other commodity costs; the cost of travel; the potential for bank failures; a soft job market; an actual or perceived decrease in disposable consumer income and wealth; increases in gaming taxes or fees; fears of recession and changes in consumer confidence in the economy; and terrorist attacks or other global events. Growth Partners’ Casino Properties and Developments business is particularly susceptible to any such changes because Planet Hollywood offers, and we expect that the Maryland Joint Venture will offer, a highly discretionary set of entertainment and leisure activities and amenities. If discretionary consumer spending declines, then Growth Partners’ results of operations will be adversely impacted.

The continuing economic downturn and adverse conditions in the local, regional, national and global markets have negatively affected the businesses Growth Partners is acquiring through the Transactions, and may continue to negatively affect those businesses in the future. During periods of economic contraction, Growth Partners’ revenues may decrease while some of its costs remain fixed or even increase, resulting in decreased earnings. In addition, Growth Partners may also be unable to find additional cost savings to offset any decrease in revenues. Even an uncertain economic outlook may adversely affect consumer spending in Growth Partners’ gaming operations and related facilities, as consumers spend less in anticipation of a potential economic downturn.

Theoretical win rates for Growth Partners’ casino operations depend on a variety of factors, some of which are beyond its control.

The gaming industry is characterized by an element of chance. Accordingly, Planet Hollywood employs, and the Maryland Joint Venture will employ, theoretical win rates to estimate what a certain type of game, on average, will win or lose in the long run. In addition to the element of chance, theoretical win rates are also

 

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affected by the spread of table limits and factors that are beyond Growth Partners’ control, such as a player’s skill and experience and behavior, the mix of games played, the financial resources of players, the volume of bets placed and the amount of time players spend gambling. As a result of the variability in these factors, the actual win rates at the casino may differ from the theoretical win rates and could result in the winnings of Growth Partners’ gaming customers exceeding those anticipated. The variability of these factors, alone or in combination, have the potential to negatively impact our actual win rates, which may adversely affect Growth Partners’ business, financial condition, results of operations and cash flows.

Planet Hollywood extends credit to its customers and may not be able to collect gaming receivables from its credit players.

Planet Hollywood conducts its gaming activities on a credit basis as well as a cash basis, which credit is unsecured. Table games players typically are extended more credit than slot players, and high stakes players are typically extended more credit than patrons who tend to wager lower amounts. High-end gaming is more volatile than other forms of gaming, and variances in win-loss results attributable to high-end gaming may have a significant positive or negative impact on cash flow and earnings in a particular quarter.

Planet Hollywood extends credit to those customers whose level of play and financial resources warrant, in the opinion of Planet Hollywood’s management, an extension of credit. For both the year ended December 31, 2012 and also the three months ended March 31, 2013, Planet Hollywood’s table games drop was approximately 21% from credit-based guest wagering. These large receivables could have a significant impact on our results of operations if deemed uncollectible.

Planet Hollywood faces intense competition from other hotel casino resorts in Las Vegas, and Horseshoe Baltimore will be subject to competition from other regional casino resorts.

There is intense competition in the gaming industry. Competition in the Las Vegas area has increased over the last several years as the result of significant increases in hotel rooms, casino size and convention, trade show and meeting facilities. Moreover, this growth is presently continuing and is expected to continue.

Resorts located on or near the Las Vegas Strip compete with other Las Vegas Strip hotels and with other hotel casinos in Las Vegas on the basis of overall atmosphere, range of amenities, level of service, price, location, entertainment offered, theme and size. Planet Hollywood competes with a large number of other hotels and motels located in and near Las Vegas, as well as other resort destinations. Many of its competitors have established gaming operations and may have greater financial and other resources than Planet Hollywood does.

We cannot assure you that declines in the Las Vegas market are over or that hotel casino resorts will continue to be popular. Continued declines in economic conditions or the popularity of hotel casino resorts or the appeal of the features offered by Planet Hollywood, could impair our financial condition and results of operations. Even as the global economy recovers, there may be excess supply in the Las Vegas market. Further, the design and amenities of Planet Hollywood may not appeal to customers. Customer preferences and trends can change, often without warning, and we may not be able to predict or respond to changes in customer preferences in time to adapt the attractions and amenities offered at Planet Hollywood to address these new trends.

In addition, in the mid-Atlantic region, existing casino resorts provide a number of gaming options for customers, thereby creating significant competition for Horseshoe Baltimore. The casino resorts in the mid-Atlantic region compete with each other on the basis of overall atmosphere, range of amenities, level of service, price, location, entertainment offered and size. Further, the casino resort that will open with the sixth license in Prince George’s County granted by the State of Maryland may draw additional customers away from Horseshoe Baltimore. If Horseshoe Baltimore is unable to effectively compete with other regional casino resorts or keep customers, this inability may negatively affect Horseshoe Baltimore’s, and therefore Growth Partners’, business and operations.

 

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Growth Partners’ Casino Properties and Developments Business may be subject to material environmental liability, including as a result of unknown environmental contamination.

The Casino Properties and Developments Business is subject to certain federal, state and local environmental laws, regulations and ordinances which govern activities or operations that may have adverse environmental effects, such as emissions to air, discharges to streams and rivers and releases of hazardous substances and pollutants into the environment, as well as handling and disposal from municipal/non-hazardous waste, and which also apply to current and previous owners or operators of real estate generally. Federal examples of these laws include the Clean Air Act, the Clean Water Act, the Resource Conservation Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act and the Oil Pollution Act of 1990. Certain of these environmental laws may impose cleanup responsibility and liability without regard to whether the owner or operator knew of or caused particular contamination or release of hazardous substances. Should unknown contamination be discovered on Growth Partners’ property, or should a release of hazardous substances occur on Growth Partners’ property, Growth Partners could be required to investigate and clean up the contamination and could also be held responsible to a governmental entity or third parties for property damage, personal injury or investigation and cleanup costs incurred in connection with the contamination or release, which may be substantial. Moreover, such contamination may also impair Growth Partners’ ability to use the affected property. Such liability could be joint and several in nature, regardless of fault, and could affect Growth Partners even if such property is vacated. The potential for substantial costs and an inability to use the property could adversely affect our business.

Planet Hollywood’s insurance coverage may not be adequate to cover all possible losses it could suffer, and, in the future, its insurance costs may increase significantly or it may be unable to obtain the same level of insurance coverage.

Planet Hollywood may suffer damage to its property caused by a casualty loss (such as fire, natural disasters and acts of war or terrorism) that could severely disrupt its business or subject it to claims by third parties who are injured or harmed. Although Planet Hollywood maintains insurance (including property, casualty, terrorism and business interruption insurance), that insurance may be inadequate or unavailable to cover all of the risks to which its business and assets may be exposed. Should an uninsured loss or loss in excess of insured limits occur, it could have a significant adverse impact on Planet Hollywood’s operations and revenues.

Planet Hollywood renews its insurance policies on an annual basis. If the cost of coverage becomes too high, Planet Hollywood may need to reduce its policy limits or agree to certain exclusions from its coverage in order to reduce the premiums to an acceptable amount. Among other factors, homeland security concerns, other catastrophic events or any change in the current U.S. statutory requirement that insurance carriers offer coverage for certain acts of terrorism could adversely affect available insurance coverage and result in increased premiums on available coverage (which may cause Planet Hollywood to elect to reduce its policy limits) and additional exclusions from coverage. Among other potential future adverse changes, in the future Planet Hollywood may elect to not, or may be unable to, obtain any coverage for losses due to acts of terrorism.

Planet Hollywood licenses the Planet Hollywood brand from affiliates of Robert Earl and there can be no assurances that the Planet Hollywood brand would not be negatively impacted by its use outside of our control.

Affiliates of Robert Earl license certain intellectual property relating to the operation of the Planet Hollywood Resort and Casino to Planet Hollywood. The license includes certain names and trademarks and the right to display certain memorabilia on the Planet Hollywood premises. Planet Hollywood has invested significant time and financing to establish its brand as a Hollywood-themed entertainment and non-gaming destination. The expiration or termination, or modification of the terms, of this license may have a materially adverse effect on Planet Hollywood’s, and therefore Growth Partners’, business, financial conditions and operations results.

 

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In addition, the Planet Hollywood brand is used by affiliates of Robert Earl in Hollywood-themed restaurants and shops around the United States and internationally. Any negative events associated with the use of the Planet Hollywood brand with these restaurants and shops may be out of Growth Partners’ control, and may negatively impact the brand’s image for the Planet Hollywood casino, which could harm Planet Hollywood’s, therefore Growth Partners’, business and results of operations.

The success of third parties adjacent to Planet Hollywood are important to our ability to generate revenue and operate our business and any deterioration to their success could materially adversely affect our revenue and operations.

Planet Hollywood does not own the businesses and amenities adjacent to its property such as the Miracle Mile Shops and the hotel tower and timeshare facility operated by Hilton Grand Vacations. However, these adjacent third-party businesses and amenities stimulate additional traffic through the Planet Hollywood complex, including the casino, which is Planet Hollywood’s largest generator of revenue. Any decrease in the popularity of, or the number of customers visiting, these adjacent businesses and amenities may lead to a corresponding decrease in the traffic through Planet Hollywood complex, which would negatively affect Planet Hollywood’s, and therefore Growth Partners’, business and operating results.

Adverse outcomes in legal proceedings could adversely affect the Horseshoe Baltimore Casino, including a delay in construction and ultimately the opening of the casino and possible abandonment of the project.

We are involved in legal proceedings concerning environmental, zoning, and construction related approvals for the Horseshoe Baltimore Casino. A complaint has been filed in the Circuit Court for Baltimore City, Maryland challenging the Maryland Department of the Environment’s (“MDE”) approval of an amendment to a cleanup plan, known as a response action plan (“RAP”), to address contamination at the Casino property (the “RAP litigation”). The RAP litigation seeks to vacate the existing RAP for the site which is required as part of our participation in MDE’s voluntary cleanup program (“VCP”). Challenges to other environmental approvals issued by the MDE are threatened. Challenges to construction and zoning approvals and permits issued by the City of Baltimore were also filed.

None of the approvals or permits we previously obtained have been rescinded as the date of this prospectus and we are vigorously contesting all challenges. The time for challenging some of MDE’s other approvals has not yet arrived but challenges are anticipated. Administrative challenges to Baltimore City grading permits and zoning approvals were filed and resolved in our favor by the City. No appeal was filed with regard to the grading permits and the appeal period has now lapsed. The decision of the Board of Municipal Zoning Appeals to grant variances for the site was appealed by separate parties on June 20 and 24, 2013.

Obtaining the necessary governmental permits and approvals can be a complex, time-consuming and costly process. The success of our efforts to obtain permits and approvals is contingent upon many variables not within our control. Obtaining environmental approvals and permits may increase costs and cause delays or halt the construction of the project, depending on the nature of the activity to be permitted and the interpretation of applicable requirements implemented by the permitting authority. Interested parties can seek to prevent the issuance of permits and approvals and pursue extensive appeal rights, including up to the Maryland Court of Appeals, the highest court in the State of Maryland. There can be no assurance that all necessary approvals and permits will be obtained and, if obtained, that the costs involved will not exceed those that we previously estimated. If any of these challenges is successful, it could result in a more expensive remediation of existing site conditions, delay in construction, and ultimately the opening of Horseshoe Baltimore and possible abandonment of the project.

Developing the Maryland Joint Venture with other equity partners adds additional risk that may result in a material adverse effect on Growth Partners’ business, financial condition and operating results.

Growth Partners is expected to indirectly hold approximately 41% interest in the Maryland Joint Venture following the CVPR Sale. While Growth Partners can influence the management of the Maryland Joint Venture through its equity ownership, Growth Partners will rely on the other equity partners for providing certain funding

 

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for development of the Maryland Joint Venture and there can be no assurances that the other equity partners will provide sufficient funding, or any funding at all. The failure of other equity partners in the Maryland Joint Venture to provide the appropriate level of funding may result in a material adverse effect on Growth Partners’ business, financial condition and operating results.

Risks Related to Our Class A Common Stock

Caesars Entertainment’s call right on our Class A common stock may result in you being forced to sell our Class A common stock at a disadvantageous time and will cause you to own stock of Caesars Entertainment. This call right may not occur at all due to the discretion of Caesars Entertainment or the inability of Caesars Entertainment to achieve sufficient liquidity to exercise such right.

After the third anniversary of the closing of the Transactions, Caesars Entertainment will have the right, which it may assign to any of its affiliates or to any transferee of all non-voting units of CGP LLC held by Caesars Entertainment, to acquire all or a portion of the voting units of CGP LLC (or, at our option, shares of CAC’s Class A common stock) not otherwise owned by Caesars Entertainment at such time. As a result, you may be forced to sell your shares of CAC’s Class A common stock on little notice and at a value that may cause you to realize a loss. The exercise of this right by Caesars Entertainment will result in you receiving consideration entirely or partly in the form of stock of Caesars Entertainment, which may be a tax-free reorganization for U.S. federal income tax purposes in certain circumstances. If the exchange is not a tax-free reorganization, you may recognize gain or loss for U.S. federal income tax purposes on such exchange depending on the amount of cash and the value of the stock of Caesars Entertainment you receive in such exchange and the adjusted tax basis of your shares of CAC’s Class A common stock. There can be no assurances that the stock of Caesars Entertainment will maintain its value from the time of Caesars Entertainment’s exercise of the call right or be part of an active trading market. As a consequence, you may be forced to dispose of the stock of Caesars Entertainment at a great loss.

In addition, Caesars Entertainment may exercise the call right in its sole discretion, subject to meeting certain conditions, so Caesars Entertainment may decide to not exercise the call right for any reason whatsoever. Moreover, if Caesars Entertainment does not meet certain liquidity requirements, it will be unable to exercise the call right. The uncertainty as to the timing of the exercise of the call right, if at all, by Caesars Entertainment may adversely affect the trading value of our stock. See “Certain Relationships and Related Party Transactions—Agreements with Caesars Entertainment and its Subsidiaries—Call Right.”

CGP LLC will be required to be liquidated in eight years and six months, which may result in you receiving less than the full value of your Class A common stock.

Following the fifth anniversary of the closing of the Transactions, our Board will have the right to cause a liquidation of CGP LLC, including the sale or winding up of CGP LLC or other monetization of all of its assets. On the eighth year and six month anniversary of the closing of the Transactions (unless otherwise agreed by Caesars Entertainment and CAC), if our Board has not previously exercised its liquidation right, CGP LLC shall, and our Board shall cause CGP LLC to, effect a liquidation. Because the liquidation will occur on a set schedule, it is possible that regulations or market factors at the time of liquidation may impede the ability to liquidate the assets of CGP LLC. If CGP LLC is unable to liquidate portions of assets, proceeds from the liquidation will be negatively impacted. Moreover, the forced liquidation does not preserve the flexibility to maximize the value of CGP LLC’s assets in a sale by waiting for an advantageous time. In addition, CAC’s allocable portion of the gain (if any) on the liquidation of the assets of CGP LLC will generally be subject to U.S. federal income tax at the regular corporate rate. As a result, you may receive less than the full value of your Class A common stock should a liquidation occur at the eighth year and six month anniversary of the closing of the Transactions.

 

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An active trading market for our Class A common stock may not develop.

Prior to this offering, there has not been a public market for our Class A common stock. In addition, we intend to apply to list shares of our Class A common stock for trading on the NASDAQ Capital Market; however, there can be no assurance that we will achieve a listing upon completion of this offering or thereafter. We cannot predict the extent to which investor interest in us will lead to the development of an active trading market or how liquid that market might become. As a result our share price may experience significant volatility and may not necessarily reflect the value of our expected performance. If an active trading market does not develop, you may have difficulty selling any of our common stock that you buy. Consequently, you may not be able to sell our Class A common stock at prices equal to or greater than the price you paid in this offering.

Future sales or the possibility of future sales of a substantial amount of our Class A common stock may depress the price of shares of our Class A common stock.

Future sales or the availability for sale of substantial amounts of our Class A common stock in the public market could adversely affect the prevailing market price of our Class A common stock and could impair our ability to raise capital through future sales of equity securities.

After giving effect to this offering as if it were to occur on the date hereof, there would be 125,359,584 shares of our Class A common stock outstanding (assuming that the subscription rights are exercised in full), all of which will be the same class of voting Class A common stock. All of the outstanding shares of our Class A common stock will be eligible for resale under Rule 144 or Rule 701 of the Securities Act, subject to volume limitations, applicable holding period requirements and the lock-up agreements described below or other contractual restrictions.

We cannot predict the size of future issuances of our Class A common stock or other securities or the effect, if any, that future issuances and sales of our Class A common stock or other securities, including future sales by Caesars Entertainment, will have on the market price of our Class A common stock. Sales of substantial amounts of Class A common stock (including shares of Class A common stock issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices for our Class A common stock.

The price and trading volume of our Class A common stock may fluctuate significantly, and you could lose all or part of your investment.

Even if an active trading market develops upon completion of this offering and listing of our Class A common stock, the market price of our Class A common stock may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume of our Class A common stock may fluctuate and cause significant price variations to occur. Volatility in the market price of our Class A common stock may prevent you from being able to sell your shares at or above the price you paid for your shares of Class A common stock. The market price for our Class A common stock could fluctuate significantly for various reasons, including:

 

   

our operating and financial performance and prospects;

 

   

our quarterly or annual earnings or those of other companies in our industry;

 

   

conditions that impact demand for the products and services of Growth Partners’ businesses;

 

   

the public’s reaction to our press releases, other public announcements and filings with the SEC;

 

   

changes in earnings estimates or recommendations by securities analysts who track our Class A common stock;

 

   

market and industry perception of our success, or lack thereof, in pursuing our growth strategy;

 

   

strategic actions by us or our competitors, such as acquisitions or restructurings;

 

   

changes in government and environmental regulation, including gaming taxes;

 

   

changes in accounting standards, policies, guidance, interpretations or principles;

 

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arrival and departure of key personnel;

 

   

the small percentage of shares to be publicly traded after this offering;

 

   

changes in our capital structure;

 

   

increases in market interests rates that would decrease the value of Growth Partners’ fixed-rate securities;

 

   

changes in the stock price of, or a restructuring of, Caesars Entertainment;

 

   

sales of Class A common stock by us or affiliates of the Sponsors;

 

   

the expiration of contractual lock-up agreements; and

 

   

changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war and responses to such events.

In addition, in recent years, the stock market has experienced significant price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies, including companies in the gaming, lodging, hospitality and entertainment industries. The changes frequently appear to occur without regard to the operating performance of the affected companies. Hence, the price of our Class A common stock could fluctuate based upon factors that have little or nothing to do with us, and these fluctuations could materially reduce our share price.

Hamlet Holdings will control us and their interests may conflict with or differ from your interests as a stockholder.

After giving effect to this offering and the granting of the Sponsor CAC Proxy, Hamlet Holdings will beneficially own approximately 70% of our Class A common stock (assuming that the subscription rights are exercised in full without the exercise of any over-subscription privilege by affiliates of the Sponsors). Hamlet Holdings will have the power to control our Board. Moreover, Hamlet Holdings will have the ability to vote on any transaction that requires the approval of our Board or our stockholders, including the approval of significant corporate transactions such as mergers and the sale of substantially all of our assets. In addition, Hamlet Holdings, the members of which are comprised of three individuals affiliated with Apollo and two individuals affiliated with TPG, as of the date hereof beneficially owned approximately 70% of Caesars Entertainment’s common stock and controls Caesars Entertainment. As a result, even though an independent committee of the Board of Caesars Entertainment may make decisions with regard to development opportunities for Growth Partners, Hamlet Holdings is in a position to exert a significant influence over both of CAC and Caesars Entertainment and the direction of their business and operations.

The interests of Hamlet Holdings and the Sponsors could conflict with or differ from the interests of holders of our Class A common stock. Affiliates of the Sponsors are in the business of making or advising on investments in companies they hold, and may from time to time in the future acquire interests in or provide advice to businesses that directly or indirectly compete with certain portions of our business or are suppliers or customers of ours or may pursue acquisitions that may be complementary to our business, in which case and, as a result, those acquisition opportunities may not be available to us.

The concentration of ownership held by Hamlet Holdings could delay, defer or prevent a change of control of us or impede a merger, takeover or other business combination which another stockholder may otherwise view favorably. In addition, a sale of a substantial number of shares of stock in the future by Hamlet Holdings could cause our stock price to decline.

So long as Hamlet Holdings continues to beneficially own a significant amount of the outstanding shares of our Class A common stock, Hamlet Holdings will continue to be able to strongly influence or effectively control our decisions.

 

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Our stockholders are subject to extensive governmental regulation and if a stockholder is found unsuitable by the gaming authority, that stockholder would not be able to beneficially own our Class A common stock directly or indirectly and we will have the right to redeem the Class A common stock of such disqualified holder.

In many jurisdictions, gaming laws can require any of our stockholders to file an application, be investigated and qualify or have his, her or its suitability determined by gaming authorities. Gaming authorities have very broad discretion in determining whether an applicant should be deemed suitable. Subject to certain administrative proceeding requirements, the gaming regulators have the authority to deny any application or limit, condition, restrict, revoke or suspend any license, registration, finding of suitability or approval, or fine any person licensed, registered or found suitable or approved, for any cause deemed reasonable by the gaming authorities. For additional information on the criteria used in making determinations regarding suitability, see “Gaming Regulatory Overview.”

For example, under Nevada gaming laws, each person who acquires, directly or indirectly, beneficial ownership of any voting security, or beneficial or record ownership of any non-voting security or any debt security, in a public corporation which is registered with the Nevada Gaming Commission, or the Gaming Commission, may be required to be found suitable if the Gaming Commission has reason to believe that his or her acquisition of that ownership, or his or her continued ownership in general, would be inconsistent with the declared public policy of Nevada, in the sole discretion of the Gaming Commission. Any person required by the Gaming Commission to be found suitable shall apply for a finding of suitability within 30 days after the Gaming Commission’s request that he or she should do so and, together with his or her application for suitability, deposit with the Nevada Gaming Control Board a sum of money which, in the sole discretion of the Control Board, will be adequate to pay the anticipated costs and charges incurred in the investigation and processing of that application for suitability, and deposit such additional sums as are required by the Control Board to pay final costs and charges. Additionally, under Ohio law, an institutional investor, which is broadly defined and includes any corporation, that holds any amount of our stock will be required to apply for and obtain a waiver of suitability determination.

Furthermore, any person required by a gaming authority to be found suitable, who is found unsuitable by the gaming authority, may not hold directly or indirectly the beneficial ownership of any voting security or the beneficial or record ownership of any non-voting security or any debt security of any public corporation which is registered with the gaming authority beyond the time prescribed by the gaming authority. Such a finding could result in an owner of our securities being required to dispose of their securities at prices less than the price paid in this offering. A violation of the foregoing may constitute a criminal offense. A finding of unsuitability by a particular gaming authority impacts that person’s ability to associate or affiliate with gaming licensees in that particular jurisdiction and could impact the person’s ability to associate or affiliate with gaming licensees in other jurisdictions. Our certificate of incorporation contains provisions establishing the right to redeem our Class A common stock held by disqualified holders if such holder is determined by any gaming regulatory agency to be unsuitable.

Many jurisdictions also require any person who acquires beneficial ownership of more than a certain percentage of voting securities of a gaming company and, in some jurisdictions, non-voting securities, typically 5%, to report the acquisition to gaming authorities, and gaming authorities may require such holders to apply for qualification or a finding of suitability, subject to limited exceptions for “institutional investors” that hold a company’s voting securities for investment purposes only.

Some jurisdictions may also limit the number of gaming licenses in which a person may hold an ownership or a controlling interest. It is unclear whether and to what extent such prohibitions will apply to online real money gaming operations when and if such operations become legal in U.S. jurisdictions other than Nevada.

Your percentage ownership in us may be diluted in the future.

Your percentage ownership in CAC may be diluted in the future because of equity awards that may be granted to our directors, officers and employees in the future. We may decide to establish equity incentive plans

 

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that will provide for the grant of common stock-based equity awards to our directors, officers and other employees. In addition, we may issue equity in order to raise capital or in connection with future acquisitions and strategic investments, which would dilute your percentage ownership.

Because we do not anticipate paying dividends on our Class A common stock in the foreseeable future, you should not expect to receive dividends on shares of our Class A common stock.

We have no present plans to pay cash dividends to our stockholders and, for the foreseeable future, intend to retain all of our earnings for use in our business. The declaration of any future dividends by us is within the discretion of our Board and will be dependent on our earnings, financial condition and capital requirements, as well as any other factors deemed relevant by our Board.

We will be a “controlled company” within the meaning of the NASDAQ Marketplace rules and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements.

Upon a listing, and upon the closing of this offering and granting of the Sponsor CAC Proxy, Hamlet Holdings will continue to control a majority of our voting Class A common stock. As a result, we will be a “controlled company” within the meaning of the NASDAQ corporate governance standards. Under the NASDAQ Marketplace rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:

 

   

the requirement that a majority of the Board consists of independent directors;

 

   

the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors;

 

   

the requirement that we have a compensation committee that is composed entirely of independent directors; and

 

   

the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees.

Following this offering, we intend to utilize these exemptions. As a result, we will not have a majority of independent directors nor will our nominating and corporate governance and compensation committees consist entirely of independent directors and we will not be required to have an annual performance evaluation of the nominating and corporate governance and compensation committees. See “Management.” Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the NASDAQ corporate governance requirements.

We are an “emerging growth company” and our possible election to delay adoption of new or revised accounting standards applicable to public companies may result in our financial statements not being comparable to those of other public companies. As a result of this and other reduced disclosure requirements applicable to emerging growth companies, our Class A common stock may be less attractive to investors.

We are an emerging growth company, as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. In addition, Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards such that an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

 

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We have elected to delay such adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to the financial statements of other public companies.

We may take advantage of these reporting exemptions until we are no longer an “emerging growth company.” We will remain an “emerging growth company” until the earliest to occur of (i) the last day of the fiscal year during which our total annual gross revenues equal or exceed $1.0 billion, (ii) the last day of the fiscal year following the fifth anniversary of our initial public offering, (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt or (iv) the date on which we are deemed a “large accelerated filer” under Rule 12b-2 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”).

We cannot predict if investors will find our Class A common stock less attractive because we will rely on certain of these exemptions. If some investors find our Class A common stock less attractive as a result, there may be a less active trading market for our Class A common stock and our stock price may be more volatile.

Becoming a company with publicly traded common stock will increase our expenses and administrative burden, particularly after we are no longer an “emerging growth company” as defined in the JOBS Act.

If we become a company with publicly traded common stock, we will incur legal, accounting and other expenses that we did not incur as a company without a publicly traded equity security. In addition, our administrative staff will be required to perform additional tasks. For example, in anticipation of becoming a company with publicly traded common stock, we will need to create or revise the roles and duties of our Board committees and retain a transfer agent. Once our Class A common stock is publicly traded, we will also be required to hold an annual meeting for our stockholders, which will require us to expend resources to prepare, print and mail a proxy statement relating to the annual meeting.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act and related regulations implemented by the SEC and the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), which amended the Sarbanes-Oxley Act, among other federal laws, are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. Dodd-Frank, signed into law on July 21, 2010, effects comprehensive changes to the regulation of financial services in the United States and will subject us to additional federal regulation. We cannot predict with any certainty the requirements of the regulations ultimately adopted or how Dodd-Frank and such regulations will impact the cost of compliance for a company with publicly traded common stock. We are currently evaluating and monitoring developments with respect to Dodd-Frank and other new and proposed rules and cannot predict or estimate the amount of the additional costs we may incur or the timing of such costs. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed. We also expect that being a company with publicly traded common stock and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our Board, particularly to serve on our audit committee, and qualified executive officers.

 

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As discussed elsewhere in this prospectus, as an “emerging growth company” as defined in the JOBS Act, we may take advantage of certain temporary exemptions from various reporting requirements, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved . When these exemptions cease to apply, we expect to incur additional expenses and devote increased management effort toward ensuring compliance with them. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs.

Risks Related to the Rights Offering

The subscription price determined for the rights offering is not an indication of the price at which our Class A common stock will trade.

The board of directors of CAC based the per share subscription price being used in the rights offering on various factors including, among other things, the valuation of assets sold and contributed to Growth Partners. Neither CAC nor its board of directors retained a financial advisor in connection with the Transactions. The per share subscription price may not be indicative of the price at which our Class A common stock will trade after the rights offering. After the date of this prospectus, you may not be able to sell shares of our Class A common stock that you hold at prices equal to or above the subscription price.

CAC may cancel the rights offering at any time prior to the expiration of the rights offering and in such case neither Caesars Entertainment nor the Subscription Agent will have any obligation to you except to return your exercise payments.

The rights offering is subject to the satisfaction or waiver by Caesars Entertainment or CAC, as applicable, of certain conditions. In addition, CAC has the right to withdraw and cancel the rights offering if, at any time prior to its expiration, the board of directors of CAC determines, in its sole discretion, not to proceed with the Transactions on the terms contemplated and as described under “Certain Relationships and Related Party Transactions—Transaction Agreement.” See “The Rights Offering—Conditions, Withdrawal and Cancellation.”

If the rights offering is cancelled, any money received from subscribing stockholders will be returned, without interest or penalty, as soon as practicable following the cancellation of the rights offering. CAC may also extend the rights offering for additional periods, although it does not presently intend to do so. If CAC cancels the rights offering and you have not exercised any rights, the subscription rights will expire, have no value, and cease to be exercisable for shares of CAC’s Class A common stock.

The subscription rights are not transferable, and there is no market for the subscription rights.

You may not sell, give away, or otherwise transfer your subscription rights. Because the subscription rights are non-transferable, there is no market or other means for you to directly realize any value associated with the subscription rights.

If you do not act promptly and follow the subscription instructions, your exercise of subscription rights will be rejected.

If you desire to purchase shares of CAC’s Class A common stock in the rights offering, you must act promptly to ensure that the Subscription Agent actually receives all required forms and payments before the expiration of the rights offering at 5:00 p.m., New York City time, on                     , 2013, unless CAC extends the rights offering for additional periods. If you are a beneficial owner of Caesars Entertainment’s common stock, you must act promptly to ensure that your broker, dealer, custodian bank or other nominee acts for you and

 

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that the Subscription Agent receives all required forms and payments before the rights offering expires. Neither CAC nor Caesars Entertainment is or will be responsible if your nominee fails to ensure that the Subscription Agent receives all required forms and payments before the rights offering expires. If you fail to complete and sign the required subscription forms, send an incorrect payment amount, or otherwise fail to follow the subscription procedures that apply to the exercise of your subscription rights before the rights offering expires, the Subscription Agent will reject your subscription or accept it only to the extent of the payment received. None of CAC, Caesars Entertainment or the Subscription Agent undertakes any responsibility or action to contact you concerning an incomplete or incorrect subscription form or payment, nor are CAC or Caesars Entertainment under any obligation to correct such forms or payment. CAC has the sole discretion to determine whether a subscription exercise properly complies with the subscription procedures.

You will not be able to sell the shares of CAC’s Class A common stock you buy in the rights offering until your account is credited with the Class A common stock.

If you are a registered stockholder of Caesars Entertainment and you purchase shares in the rights offering, your account will be credited with our Class A common stock as soon as practicable following the expiration of the rights offering. If your shares of Caesars Entertainment’s common stock are held by a broker, dealer, custodian bank or other nominee and you purchase shares of our Class A common stock pursuant to your subscription rights, your account with your nominee will be credited with the shares of our Class A common stock you purchased in the rights offering as soon as practicable following the expiration of the rights offering, or such later date as to which the rights offering may be extended. Until your account is credited, you may not be able to sell your shares even though the CAC’s Class A common stock issued in the rights offering will be listed for trading on the NASDAQ Capital Market. The stock price may decline between the time you decide to sell your CAC shares and the time you are actually able to sell such shares.

You may not revoke your exercise of the subscription rights and you could be committed to buying shares at a price above the prevailing market price after completion of the rights offering.

Once you exercise your rights, you may not revoke the exercise even if you later learn information that you consider to be unfavorable to the exercise of your rights. If you exercise your rights, you may not be able to sell the CAC’s Class A common stock purchased under the rights at a price equal to or greater than the subscription price, and you may lose all or part of your investment in our Class A common stock.

You will not receive interest on your subscription funds during the period pending the closing of the offering.

The Subscription Agent will hold the gross proceeds from the sale of shares under the rights in escrow in a segregated bank account, and it will release the proceeds together with any interest earned on the proceeds, less any applicable withholding taxes, to Caesars Entertainment as soon as is practicable after the expiration of the rights offering.

If the rights offering is cancelled, any money received from subscribing holders of rights will be returned, without interest or penalty, as soon as practicable following the cancellation of the rights offering.

The U.S. federal income tax consequences of the receipt, exercise, expiration and cancellation of the subscription rights are not certain.

The treatment of the receipt, exercise, expiration and cancellation of the subscription rights for U.S. federal income tax purposes is not entirely clear. The U.S. Internal Revenue Service (the “IRS”) may disagree with the tax treatment discussed herein. You should discuss with your tax advisor the treatment of the receipt, exercise, expiration and cancellation of the subscription rights for U.S. federal income tax purposes.

 

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The receipt of the subscription rights should generally be taxable dividend income to you for U.S. federal income tax purposes.

If you receive a subscription right, you should generally expect to have (1) taxable dividend income equal to the fair market value (if any) of the subscription right on the date of its distribution by Caesars Entertainment and (2) no additional income upon the exercise of the subscription right if you choose to exercise such right. You may need to fund any tax resulting from the receipt of the subscription right with cash from other sources. You should discuss with your tax advisor the U.S. federal income tax consequences of receiving and exercising the subscription rights.

For a detailed discussion, see “Material U.S. Federal Income Tax Considerations.”

If you receive but do not exercise the subscription rights before they expire, you may be subject to adverse U.S. federal income tax consequences.

If you receive a subscription right from Caesars Entertainment and do not exercise that right before it expires, you should generally expect to have (1) taxable dividend income equal to the fair market value (if any) of the subscription right on the date of its distribution by Caesars Entertainment and (2) a short-term capital loss upon the expiration of such right in an amount equal to your adjusted tax basis (if any) in such right. In general, capital losses are available to offset only capital gains and may not be used to offset dividend or other income (except, to the extent of up to $3,000 of capital loss per year, in the case of a non-corporate U.S. stockholder). Accordingly, if you receive a subscription right from Caesars Entertainment and take no action, you may owe tax and need to fund that tax with cash from other sources.

By illustration, if you receive subscription rights that have a value of $5,000 on the date they are distributed by Caesars Entertainment, you do not exercise those rights before they expire and Caesars Entertainment does not cancel the rights offering, you should generally expect to have $5,000 of dividend income upon the receipt of the subscription rights and a $5,000 short-term capital loss upon the expiration of those rights.

You should discuss with your tax advisor the U.S. federal income tax consequences of receiving and not exercising the subscription rights.

For a detailed discussion, see “Material U.S. Federal Income Tax Considerations.”

If you receive subscription rights and CAC subsequently cancels the right offering, you may be subject to adverse U.S. federal income tax consequences.

You should discuss with your tax advisor the tax consequences of receiving subscription rights if CAC subsequently cancels the rights offering. There are limited authorities addressing the U.S. federal income tax consequences that would apply to you in this circumstance. Certain of the authorities suggest that in this circumstance you may not have taxable dividend income upon the receipt of the subscription rights if the receipt and cancellation occur in the same taxable year. However, the scope of those authorities is unclear and Caesars Entertainment (and any other applicable withholding agent) is likely to take the position, for information reporting and withholding purposes, that you have taxable dividend income upon the receipt of the subscription rights even if CAC subsequently cancels the rights offering. If withholding tax is withheld from you in this event, you should consult your tax advisor as to whether to seek a refund of such amount from the U.S. Internal Revenue Service.

If you have taxable dividend income upon the receipt of a subscription right even though CAC subsequently cancels the rights offering, you should generally expect to have a short-term capital loss upon the cancellation of the subscription right in an amount equal to your adjusted tax basis (if any) in such right.

 

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For a detailed discussion, see “Material U.S. Federal Income Tax Considerations.”

If you are a non-U.S. stockholder, the distribution of the subscription rights to you will generally be subject to U.S. federal withholding tax.

If you are non-U.S. stockholder, you will generally be subject to U.S. federal withholding tax at a rate of 30% of the fair market value of the subscription rights (or at a lower rate if provided by an applicable tax treaty and you provide appropriate documentation required to claim benefits under such tax treaty (generally, IRS Form W-8BEN) to the applicable withholding agent). If such withholding tax applies to the distribution of the subscription rights to you, Caesars Entertainment, your broker or another applicable withholding agent will be required to remit any such withholding tax in cash to the IRS. Depending on the circumstances, Caesars Entertainment, your broker or another applicable withholding agent may obtain the funds necessary to remit any such withholding tax by asking you to provide the funds, by using funds in your account with your broker or by another means (if any) available. CAC shall reimburse Caesars Entertainment for any amounts paid by Caesars Entertainment with respect to withholding obligations on the distribution of the subscription rights.

You should discuss with your tax advisor the U.S. federal withholding tax consequences of receiving the subscription rights and the availability of any tax treaty benefits to you.

For a detailed discussion, see “Material U.S. Federal Income Tax Considerations.”

If the rights offering is not fully subscribed, the beneficial ownership of CAC by Hamlet Holdings and other stockholders may increase.

Affiliates of the Sponsors have advised Caesars Entertainment that they intend to exercise subscription rights of at least $500.0 million, which would represent approximately 42% of our common stock (assuming the subscription rights are exercised in full), though they have not entered into any agreement to do so. Consummation of the Transactions is contingent on the exercise of subscription rights of at least $500.0 million by affiliates of the Sponsors. As a result, following the completion of the rights offering and the granting of the Sponsor CAC Proxy, we expect Hamlet Holdings will beneficially own at least 70% of our common stock. In addition, to the extent that the subscription rights are not exercised in full by all holders of rights, affiliates of the Sponsors, through the granting of the Sponsor CAC Proxy, may increase Hamlet Holdings’ percentage beneficial ownership of CAC through their exercise of the over-subscription privilege, through open market purchases of CAC’s Class A common stock or otherwise. Consequently, depending on whether other holders of subscription rights exercise their subscription rights, Hamlet Holdings may beneficially own up to 100% of our outstanding shares following the consummation of the Transactions. If the subscription rights are not exercised in full, other existing stockholders of Caesars Entertainment may also increase their percentage ownership of CAC through participation in any over-subscription or otherwise. Your interests as a holder of CAC’s Class A common stock may differ from the interests of Hamlet Holdings or other existing stockholders of Caesars Entertainment.

 

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CAUTIONARY STATEMENTS CONCERNING FORWARD LOOKING STATEMENTS

Some of the statements in this prospectus constitute forward-looking statements that do not directly or exclusively relate to historical facts. You should not place undue reliance on such statements because they are subject to numerous uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategy. These statements often include words such as “believe,” “project,” “might,” “expect,” “may,” “will,” “should,” “seek,” “approximately,” “intend,” “plan,” “potential,” “estimate,” or “anticipate” or similar expressions that concern our strategy, plans or intentions. All statements we make relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results are forward looking statements. These forward looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those that we expected. We derive many of our forward looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results.

We disclose important factors that could cause actual results to differ materially from our expectations under “Risk Factors” and elsewhere in this prospectus. Some of the factors that we believe could materially affect our results include:

 

   

CAC and Growth Partners’ dependence on Caesars Entertainment and its subsidiaries to provide support and services, as well as Growth Partners’ dependence on Caesars Entertainment’s senior management’s expertise and its participation in Caesars’ Total Rewards loyalty program;

 

   

the effects of a default by Caesars Entertainment on certain debt obligations;

 

   

Caesars Entertainment’s interests may conflict with Growth Partners’ interests and may possibly keep all potential development opportunities for itself;

 

   

the effects if a third party successfully challenges Caesars Entertainment or its affiliates ownership of, or right to use, the Caesars-related marks, which CIE licenses;

 

   

CIE’s reliance on Caesars Entertainment to obtain online gaming licenses;

 

   

the adverse effects if Caesars Entertainment or any of its subsidiaries were to file for bankruptcy;

 

   

the effects of local and national economic, credit and capital market conditions on the economy in general, and on the gaming industry in particular;

 

   

the effects of competition, including locations of competitors and operating and market competition;

 

   

the sensitivity of our business to reductions in discretionary consumer spending;

 

   

construction factors, including delays, increased costs of labor and materials, availability of labor and materials, zoning issues, environmental restrictions, soil and water conditions, weather and other hazards, site access matters and building permit issues;

 

   

the new and rapidly changing industry in which we operate;

 

   

our new business model and short operating history;

 

   

our ability to realize the anticipated benefits of current or potential future acquisitions;

 

   

the additional capital that Growth Partners may require to support business growth may not be available on acceptable terms;

 

   

the adverse effects if extensive governmental regulation and taxation policies, which are applicable to Growth Partners’, are enforced;

 

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the difficulty of operating Growth Partners’ business separately from Caesars Entertainment and managing that process effectively could take up a significant amount of management’s time;

 

   

the ability to timely and cost-effectively integrate companies that we acquire into our operations;

 

   

the uncertainty surrounding whether CIE’s games will retain their popularity;

 

   

CIE’s ability to launch new games on new and emerging platforms;

 

   

CIE’s reliance on a small portion of its total players for nearly all of its revenue from its social games;

 

   

our ability to expand into international markets in light of additional business, regulatory, operational, financial and economic risks associated with such expansion;

 

   

evolving regulations concerning the social and mobile games industry as well as data privacy, including, but not limited to, the effect of U.S. and foreign laws, some of which are unsettled and still developing;

 

   

the low barriers to entry and intense competition of social and mobile games industry could have adverse effect on CIE and Growth Partners;

 

   

evolving U.S. and foreign laws could subject CIE to claims and prevent CIE from providing its current games to players or to modify its games;

 

   

any failure to protect our trademarks or other intellectual property;

 

   

the effect on our business strategy if real money online poker is not legalized in the United States or is legalized in an unfavorable manner;

 

   

the intense competition Planet Hollywood faces from other hotel casino resorts in Las Vegas and Horseshoe Baltimore faces from other regional casino resorts;

 

   

the call right in our Class A common stock may result in the stockholders being forced to sell our Class A common stock at a disadvantageous time and will cause you to own stock of Caesars Entertainment;

 

   

the potentially conflicting interests of Hamlet Holdings and the Sponsors, on the one hand, and our other stockholders, on the other hand;

 

   

the extensive governmental regulation which is applicable to our stockholders

 

   

political and economic uncertainty created by terrorist attacks and other acts of war or hostility; and

 

   

the other factors set forth under “Risk Factors.”

We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward looking statements contained in this prospectus, which speak only as of the date of this prospectus, may not in fact occur. We undertake no obligation to publicly update or revise any forward looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

 

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MARKET AND INDUSTRY DATA AND FORECASTS

Information regarding market share, market position and industry data pertaining to our business contained in this prospectus consists of our estimates based on data and reports compiled by industry sources and professional organizations, including Casino City’s North American Gaming Almanac, 2012 AGA Survey of Casino Entertainment, Las Vegas Convention and Visitors Authority (“LVCVA”), Nevada State Gaming Control Board—Nevada Gaming Abstract, AppData, an independent service that publically reports traffic data for games and other applications on Facebook, ThinkEquity, an investment banking boutique focused on growth companies, eMarketer Inc., a digital market research firm, Nielsen, an independent provider of research for consumer habits and trends and H2GC, a source of data regarding the value and volume of activity across the global gaming industry.

Although we believe that the third-party sources are reliable, we have not independently verified the accuracy or completeness of the market industry data provided by third parties or by industry or general publications. Similarly, while we believe our internal estimates with respect to our industry are reliable, our estimates have not been verified by any independent sources. While we are not aware of any misstatements regarding any industry data presented in this prospectus, our estimates, in particular as they relate to market share and our general expectations, involve risks and uncertainties and are subject to change based on various factors, including those discussed under “Risk Factors.”

 

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USE OF PROCEEDS

Assuming the subscription rights are exercised in full, we expect to receive cash proceeds of approximately $1,182.0 million as a result of the sale of shares of CAC’s Class A common stock. CAC plans to use the gross proceeds of the sale of shares of its Class A common stock to purchase voting units in CGP LLC. Growth Partners plans to use a portion of such proceeds to complete the Purchase Transaction and to reimburse Caesars Entertainment and CAC for fees and expenses incurred in connection with this offering and the remainder of such proceeds for general corporate purposes, including to make strategic investments. As of the date of this prospectus, Caesars Entertainment has incurred approximately $10.3 million of fees and expenses in connection with this offering. If only affiliates of the Sponsors were to exercise their subscription rights, we expect CAC will receive approximately $500.0 million in cash proceeds from this offering, which would be sufficient to cover the contemplated use of proceeds.

 

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CAPITALIZATION

The following tables present the capitalization of CAC and of the historical combined financial statements of the entities and assets that will be contributed to or purchased by Growth Partners as of March 31, 2013:

 

   

on an actual basis;

 

   

on an unaudited pro forma as adjusted basis after giving effect to this offering depicting (1) the minimum expected exercised subscription in shares of CAC’s Class A common stock assuming only affiliates of the Sponsors were to exercise their subscription rights, of approximately $500.0 million in gross proceeds (the “minimum” scenario), and (2) the maximum expected exercised subscription in shares of CAC’s Class A common stock assuming all of the holders of subscription rights were to exercise their rights, of approximately $1,182.0 million in gross proceeds (the “maximum” scenario); and

 

   

on an unaudited pro forma as adjusted basis after giving effect to the completion of the Transactions depicting (1) the “minimum” scenario, and (2) the “maximum” scenario.

You should read this table in conjunction with “Selected Historical Condensed Financial Data of Caesars Acquisition Company and Selected Historical Combined Condensed Financial Data of Caesars Growth Partners, LLC,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Description of Indebtedness” and our financial statements and the related notes included elsewhere in this prospectus.

 

     Capitalization of Caesars Acquisition Company  
            Minimum subscription funding Pro
forma As of February 25, 2013
     Maximum subscription funding Pro
forma As of February 25, 2013
 
(in millions)    Actual      As adjusted for
this offering
     As adjusted for the
Transactions
     As adjusted for
this offering
     As adjusted for the
Transactions
 
 

Cash and cash equivalents

   $  —         $ 500.0       $  —         $ 1,182.0       $  —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
 

Equity…………………………….

   $  —         $ 500.0       $ 500.0       $ 1,182.0       $ 1,182.0   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
 

Total capitalization………….

   $  —         $ 500.0       $ 500.0       $ 1,182.0       $ 1,182.0   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Supplemental Capitalization of Growth Partners  
            Minimum subscription funding Pro
forma As of March 31, 2013
     Maximum subscription funding Pro
forma As of March 31, 2013
 
(in millions)    Actual      As adjusted for
this offering
     As adjusted for the
Transactions
     As adjusted for
this offering
     As adjusted for the
Transactions
 

Cash and cash equivalents

   $ 144.2       $ 144.2       $ 284.2       $ 144.2       $ 966.2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Debt:

              

PHW Las Vegas, LLC senior secured term loan

   $ 464.6       $ 464.6       $ 464.6       $ 464.6       $ 464.6   

CIE credit facility

     39.8         39.8         39.8         39.8         39.8   

Convertible notes

     47.7         47.7         47.7         47.7         47.7   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total long-term debt, including current portion

     552.1         552.1         552.1         552.1         552.1   

Equity

     953.4         953.4         1,775.0         953.4         2,457.0   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total capitalization

   $ 1,505.5       $ 1,505.5       $ 2,327.1       $ 1,505.5       $ 3,009.1   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION

Subscription Rights Offering

As further described in “Prospectus Summary—The Rights Offering,” Caesars Entertainment will distribute, at no charge, to holders of shares of Caesars Entertainment’s common stock as of the record date, subscription rights to purchase shares of CAC’s Class A common stock at a price to be determined. Each subscription right will entitle its holder to purchase from CAC shares of CAC’s Class A common stock. Affiliates of the Sponsors have advised Caesars Entertainment that they intend to exercise subscription rights of at least $500.0 million, though they have not entered into any agreement to do so. CAC plans to use the net proceeds of the sale of shares of its Class A common stock to purchase voting units in CGP LLC. Growth Partners will use $360.0 million of proceeds received from CAC to purchase from subsidiaries of Caesars Entertainment (i) Planet Hollywood, (ii) Caesars Entertainment’s joint venture interests in Horseshoe Baltimore and (iii) a 50% interest in the management fee revenues for both of those properties. The purchase price for these assets is subject to adjustment based on Caesars Entertainment’s equity contribution to the Maryland Joint Venture prior to the closing of the offering. We refer to these transactions as the “Purchase Transaction” and these assets as the “Purchased Assets.”

In connection with the distribution of the subscription rights, subsidiaries of Caesars Entertainment will contribute to Growth Partners, in exchange for non-voting units, (i) all of the shares of CIE’s outstanding common stock held by HIE Holdings, Inc., a subsidiary of Caesars Entertainment, and (ii) approximately $1.1 billion in aggregate principal amount of the CEOC Notes.

CAC will account for its interests in Growth Partners using a balance sheet approach to the equity method of accounting, referred to as hypothetical liquidation at book value (“HLBV”) accounting. For additional information on CAC’s application of HLBV accounting, please see the footnotes to the unaudited pro forma condensed financial information.

Pro Forma Financial Information

The unaudited pro forma statement of operations of CAC for the years ended December 31, 2012 and 2011 and for the quarters ended March 31, 2013 and 2012 adjust the historical combined financial statements of the entities and assets that will become Growth Partners to give effect to the following transactions as if each occurred as of January 1, 2011:

 

   

The legal creation of CGP LLC as a limited liability company;

 

   

The purchase by Growth Partners of a 50% interest in the management fee revenues to be received by (a) PHW Manager, LLC , which holds a management agreement to manage Planet Hollywood, and (b) a subsidiary of CEOC that holds a management agreement to manage Horseshoe Baltimore;

 

   

The closing of the Subscription Rights offering, the receipt of related funds, and the investment of those funds by CAC into Growth Partners; and

 

   

The accounting for the investment in Growth Partners by CAC as a reorganization of entities under common control using the HLBV approach to the equity method of accounting.

The unaudited pro forma condensed balance sheet has been prepared as if CAC had effected the subscription rights offering and the accounting for the investment in Growth Partners by CAC as an equity method investment had occurred as of March 31, 2013.

CAC will own between 23.2% and 43.1% of the total outstanding equity units in CGP LLC, depending on the number of subscription rights exercised in the offering and the relative fair value of the businesses and assets contributed by Caesars Entertainment. Specifically, if only affiliates of the Sponsors were to exercise their subscription rights, CAC would receive approximately $500.0 million in net proceeds, which would be used to purchase voting units of CGP LLC, representing approximately 23.2% of the total outstanding equity units of CGP LLC (the “minimum” scenario). If all of the holders of subscription rights were to exercise such rights, CAC would receive approximately $1,182.0 million in net proceeds, which would be used to purchase voting

 

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units of CGP LLC, representing approximately 43.1% of the total outstanding equity units of CGP LLC (the “maximum” scenario). CAC’s economic ownership percentages for both the minimum and maximum scenarios will change based upon the fair value of acquired and contributed assets from Caesars Entertainment. For purposes of the pro forma financial information, we estimated the fair value of the Purchased Assets to be $360.0 million and the fair value of the Contributed Assets to be $1,275.0 million.

The unaudited pro forma condensed financial data should be read in conjunction with “Selected Historical Condensed Financial Data of Caesars Acquisition Company and Selected Historical Combined Condensed Financial Data of Caesars Growth Partners, LLC,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited financial statements of Growth Partners and CAC and related notes thereto, included elsewhere in this prospectus. The unaudited pro forma condensed financial data is included for informational purposes only and does not purport to reflect our results of operations or financial position that would have occurred had the subscriptions rights offering or the accounting for our investment in Growth Partners under the equity method occurred on the dates assumed, and it therefore should not be relied upon as being indicative of our results of operations or financial position had these transactions occurred on such dates. The estimates and assumptions used in preparation of the unaudited pro forma condensed financial information may be materially different from our actual experience in connection with any subscription in shares offered or use of proceeds from such subscription.

 

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CAESARS ACQUISITION COMPANY

UNAUDITED PRO FORMA CONDENSED BALANCE SHEET

AS OF MARCH 31, 2013

 

                      Pro Forma Adjustments Assuming
Minimum Subscription Funding
    Pro Forma Adjustments Assuming
Maximum Subscription Funding
 
    Historical
Growth
Partners
    Pro Forma
Adjustments
    Historical
Growth
Partners (as
Adjusted)
    Subscription
Rights Offering
    Use of Equity
Method
Accounting
    Minimum
Subscription
Pro Forma
    Subscription
Rights Offering
    Use of Equity
Method
Accounting
    Maximum
Subscription
Pro Forma
 

ASSETS

          (d)        (e)          (d)        (e)     

Current assets

                 

Cash and cash equivalents

  $ 144.2      $ —        $ 144.2      $ 500.0      $ (644.2   $ —        $ 1,182.0      $ (1,326.2   $ —     

Short-term investments

    2.8        —          2.8        —          (2.8     —          —          (2.8     —     

Receivables, net of allowance for doubtful accounts

    42.5        —          42.5        —          (42.5     —          —          (42.5     —     

Interest receivable from related party

    26.3        —          26.3        —          (26.3     —          —          (26.3     —     

Prepayments and other current assets

    7.8        —          7.8        —          (7.8     —          —          (7.8     —     

Deferred tax assets

    1.6        0.2 (c)      1.8        —          (1.8     —          —          (1.8     —     

Restricted cash

    7.5        —          7.5        —          (7.5     —          —          (7.5     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

    232.7        0.2        232.9        500.0        (732.9     —          1,182.0        (1,414.9     —     

Investments in notes from related party

    906.6        —          906.6        —          (906.6     —          —          (906.6     —     

Land, property and equipment, net

    424.3        —          424.3        —          (424.3     —          —          (424.3     —     

Goodwill

    97.4        —          97.4        —          (97.4     —          —          (97.4     —     

Intangible assets other than goodwill, net

    173.1        —          173.1        —          (173.1     —          —          (173.1     —     

Equity method investments in Growth Partners

    —          —          —          —          500.0        500.0        —          1,182.0        1,182.0   

Restricted cash

    28.7        —          28.7        —          (28.7     —          —          (28.7     —     

Management fee

    —          90.0 (a)      90.0        —          (90.0     —          —          (90.0     —     

Deferred charges and other

    3.1        —          3.1        —          (3.1     —          —          (3.1     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 1,865.9      $ 90.2      $ 1,956.1      $ 500.0      $ (1,956.1   $ 500.0      $ 1,182.0      $ (1,956.1   $ 1,182.0   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND EQUITY

                 

Current liabilities

                 

Accounts payable

  $ 14.3      $ —        $ 14.3      $ —        $ (14.3   $ —        $ —        $ (14.3   $ —     

Payables to related parties

    24.2        3.6 (b),(c)      27.8        —          (27.8     —          —          (27.8     —     

Accrued expenses

    106.8        —          106.8        —          (106.8     —          —          (106.8     —     

Foreign tax payable

    6.4        —          6.4        —          (6.4     —          —          (6.4     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

    151.7        3.6        155.3        —          (155.3     —          —          (155.3     —     

Long-term debt

    464.6        —          464.6        —          (464.6     —          —          (464.6     —     

Long-term debt to related party

    39.8        —          39.8        —          (39.8     —          —          (39.8     —     

Convertible notes issues to related party

    47.7        —          47.7        —          (47.7     —          —          (47.7     —     

Deferred tax liabilities

    173.5        (169.9 )(c)      3.6        —          (3.6     —          —          (3.6     —     

Deferred credits and other

    34.0        —   (k)      34.0        —          (34.0     —          —          (34.0     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    911.3        (166.3     745.0        —          (745.0     —          —          (745.0     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Redeemable non-controlling interests

    1.2        —          1.2        —          (1.2     —          —          (1.2     —     

Equity

                 

Common stock

    —          —          —          0.1        —          0.1        0.1        —          0.1   

Additional paid-in capital

    —          —          —          499.9        —          499.9        1,181.9        —          1,181.9   

Net parent investment

    764.6        256.5 (a),(b),(c)      1,021.1        —          (1,021.1     —          —          (1,021.1     —     

Accumulated other comprehensive income

    175.9        —          175.9        —          (175.9     —          —          (175.9     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Growth Partners Equity

    940.5        256.5        1,197.0        500.0        (1,197.0     500.0        1,182.0        (1,197.0     1,182.0   

Non-controlling interests

    12.9        —          12.9        —          (12.9     —          —          (12.9     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

    953.4        256.5        1,209.9        500.0        (1,209.9     500.0        1,182.0        (1,209.9     1,182.0   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 1,865.9      $ 90.2      $ 1,956.1      $ 500.0      $ (1,956.1   $ 500.0      $ 1,182.0      $ (1,956.1   $ 1,182.0   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying Notes to Pro Forma Financial Information

 

84


Table of Contents

CAESARS ACQUISITION COMPANY

UNAUDITED PRO FORMA STATEMENT OF OPERATIONS

FOR THE QUARTER ENDED MARCH 31, 2013

 

                      Pro Forma Adjustments Assuming
Minimum Subscription Funding
    Pro Forma Adjustments Assuming
Maximum Subscription Funding
 
    Historical
Growth
Partners
    Pro Forma
Adjustments
    Historical
Growth
Partners (as
Adjusted)
    Subscription
Rights
Offering
    Use of Equity
Method
Accounting
    Minimum
Subscription

Pro Forma
    Subscription
Rights
Offering
    Use of Equity
Method
Accounting
    Maximum
Subscription

Pro Forma
 

Revenues

            (g)            (g)     

Interactive Entertainment

                 

Social and mobile games

  $ 66.6      $ —        $ 66.6      $ —        $ (66.6   $ —        $ —        $ (66.6   $ —     

WSOP and online real money gaming

    2.0        —          2.0        —          (2.0     —          —          (2.0     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    68.6        —          68.6        —          (68.6     —          —          (68.6     —     

Casino Properties and Development

                 

Casino

    44.8        —          44.8        —          (44.8     —          —          (44.8     —     

Food and beverage

    21.4        —          21.4        —          (21.4     —          —          (21.4     —     

Rooms

    23.6        —          23.6        —          (23.6     —          —          (23.6     —     

Other

    6.2        —          6.2        —          (6.2     —          —          (6.2     —     

Less: casino promotional allowances

    (13.0     —          (13.0     —          13.0        —          —          13.0        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    83.0        —          83.0        —          (83.0     —          —          (83.0     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net revenues

    151.6        —          151.6        —          (151.6     —          —          (151.6     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

                 

Interactive Entertainment —Direct

                 

Platform fees

    21.1        —          21.1        —          (21.1     —          —          (21.1     —     

Casino Properties and Development—Direct

                 

Casino

    19.2        —          19.2        —          (19.2     —          —          (19.2     —     

Food and beverage

    10.1        —          10.1        —          (10.1     —          —          (10.1     —     

Rooms

    6.4        —          6.4        —          (6.4     —          —          (6.4     —     

Property, general, administrative and other

    56.8        (1.7 )(f)      55.1        —          (55.1     —          —          (55.1     —     

Depreciation and amortization

    10.4        —          10.4        —          (10.4     —          —          (10.4     —     

Change in fair value of contingent consideration

    52.4        —          52.4        —          (52.4     —          —          (52.4     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    176.4        (1.7     174.7        —          (174.7     —          —          (174.7     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Loss)/income from operations

    (24.8     1.7        (23.1     —          23.1        —          —          23.1        —     

Interest expense, net of interest capitalized

    (10.1     —          (10.1     —          10.1        —          —          10.1        —     

Income from equity method investment in Growth Partners

    —          —          —          —          11.5        11.5        —          11.5        11.5   

Interest income—related party

    40.6        —          40.6        —          (40.6     —          —          (40.6     —     

Other income, net

    0.2        —          0.2        —          (0.2     —          —          (0.2     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

    5.9        1.7        7.6        —          3.9        11.5        —          3.9        11.5   

Provision for income taxes

    (1.7     15.9 (h)      14.2        —          (18.2 )(i)      (4.0     —          (18.2 )(i)      (4.0
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 4.2      $ 17.6      $ 21.8      $ —        $ (14.3   $ 7.5      $ —        $ (14.3   $ 7.5   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding (basic and diluted)

          52,990,608          52,990,608        125,359,584          125,359,584   
       

 

 

     

 

 

   

 

 

     

 

 

 

Earnings per share (basic and diluted)

            $ 0.14 (j)        $ 0.06 (j) 
           

 

 

       

 

 

 

See accompanying Notes to Pro Forma Financial Information

 

85


Table of Contents

CAESARS ACQUISITION COMPANY

UNAUDITED PRO FORMA STATEMENT OF OPERATIONS

FOR THE QUARTER ENDED MARCH 31, 2012

 

                      Pro Forma Adjustments Assuming
Minimum Subscription Funding
    Pro Forma Adjustments Assuming
Maximum Subscription Funding
 
    Historical
Growth
Partners
    Pro Forma
Adjustments
    Historical
Growth
Partners (as
Adjusted)
    Subscription
Rights
Offering
    Use of Equity
Method
Accounting
    Minimum
Subscription
Pro Forma
    Subscription
Rights

Offering
    Use of Equity
Method
Accounting
    Maximum
Subscription
Pro Forma
 

Revenues

            (g)            (g)     

Interactive Entertainment

                 

Social and mobile games

  $ 41.3      $ —        $ 41.3      $ —        $ (41.3   $ —        $ —        $ (41.3   $ —     

WSOP and online real money gaming

    2.0        —          2.0        —          (2.0     —          —          (2.0     —