Caesars Entertainment has reached an agreement with Carl Icahn to replace three of its board members with the activist investor’s nominees.

The settlement with Mr Icahn, who has built a 10 per cent stake in Caesars, could open a door to the casino operator merging with a rival.

“Caesars would be a great opportunity for certain investors who have already expressed interest, and I’m glad the Board will explore these opportunities,” Mr Icahn, the 82-year old billionaire investor said.

The company has become a magnet for hedge funds seeking to create value by merging Caesars with a rival group. Caesars’ share price has climbed since the beginning of the year from below $6 to more than $8. In pre-market trading on Friday its share price rose about 2 per cent.

The gaming industry has attracted attention from activist investors who believe casino chains are ripe for consolidation, with Starboard Value reportedly building a stake in MGM Resorts, joining Canyon Capital, Eminence Capital and HG Vora. HG Vora is also an investor in Caesars.

Icahn can appoint a fourth representative to the board if Caesars fails to hire a new chief executive within 45 days of the agreement. Mark Frissora, the former chief executive, announced he would be leaving his role in February.

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