Reno-based Eldorado Resorts said Monday it was buying Caesars Entertainment in a $17.3 billion cash and stock transaction that will create the world’s largest gaming company with 60 resorts in 16 states under one name.
Under terms of the deal, Eldorado will pay $8.40 per share in cash and 0.0899 shares of Eldorado stock for each Caesars share, or $12.75 per share. The combined business will be called Caesars and its shares will be traded on the Nasdaq.
The company will be led by Eldorado CEO Tom Reeg and Eldorado Chairman Gary Carano. It will be headquartered in Reno where Eldorado is based, and will have “significant corporate presence” in Caesars hometown of Las Vegas.
Eldorado CEO Thomas Reeg
In a statement, Reeg said the combined company will create “an extremely powerful suite of iconic gaming and entertainment brands, as well as valuable strategic alliances with industry leaders in sports betting and online gaming. The combined entity will serve customers in essentially every major U.S. gaming market.”
During an early morning conference call with analysts, Reeg said he expects the combined company will achieve $500 million in cost savings within the first year after closing.
Shareholders of Eldorado will hold about 51 percent of the company’s outstanding stock, with Caesars shareholders holding the remaining and 49 percent. The deal is targeted to close in the first half of 2020 and requires approval by gaming regulators in multiple states, the Federal Trade Commission, and shareholders of both companies.
Eldorado currently operates 26 casinos in 12 states; Caesars operates close to 40 casinos in 13 states, including nine resorts on or near the Las Vegas Strip, a market where Eldorado is currently absent.
Reeg said on the conference call he expects Eldorado to sell some casinos in markets where there could be federal anti-trust issues before the transaction closes. He also said the company is evaluating Caesars’ casinos on the Strip, which includes Caesars Palace, Bally’s Las Vegas, Harrah’s Las Vegas, the Linq, Paris Las Vegas and Planet Hollywood.
“As I sit here today, there is more Strip exposure than we need,” Reeg said. “I would expected we would be a seller of Strip assets, but that decision has not been made.”
As of today, the combined company would operate 51,000 hotel rooms, 71,000 slot machines, 4,000 table games, and 300 food and beverage outlets.
Reeg also hinted that Caesars may be ending its international expansion efforts, notably a push for one of the three integrated resort opportunities in Japan.
“Not made firm decisions on international have been made yet,” Reeg said. “The opportunity internationally will have to be stupendous for us to run in that direction”
Caesars emerged from a two-and-a-half-year bankruptcy reorganization in 2017 that sliced some $12 billion in debt from the company’s books and created VICI Properties, a real estate investment trust that owns the land and buildings associated with 20 Caesars resorts. The operations are leased back to Caesars Entertainment.
As part of the transaction, VICI will acquire the real estate associated with Harrah’s Atlantic City, Harrah’s Laughlin and Harrah’s New Orleans from Caesars for $1.8 billion and lease the operations back to Eldorado.
VICI will also amend the existing leases into a new master lease and has the right of first refusal on two Las Vegas Strip properties and the Horseshoe Casino Baltimore for any additional sale or sale-leaseback transactions.
Eldorado has been one of the most active gaming companies in the acquisition market over the last two years. In 2017, Eldorado acquired Isle of Capri Resorts for $1.7 billion, and last year, the company bought seven casinos from Tropicana Entertainment for $1.85 billion in a joint venture with real estate investment trust Gaming and Leisure Properties, and added the Grand Victoria Casino in Elgin, Illinois for $327.5 million.
The agreement comes three months after Caesars had agreed to give Eldorado access to its books under pressure from billionaire investor Carl Icahn. The 83-year-old corporate raider acquired a 28.5 percent ownership in Caesars through stock sales and swaps and had been pushing for a merger or sale of the casino giant since the beginning of the year.
Icahn said Monday the Caesars board acted “responsibly and decisively” in negotiating the deal.
In April, Icahn named Tony Rodio as Caesars CEO. Rodio was CEO of Ichan’s Tropicana Entertainment that was sold to Eldorado last year.
A week ago, Reno-based Eldorado said it was selling three of its regional casinos in two states for $385 million to VICI and Century Casinos.
Rodio said in a statement the Caesars Rewards player loyalty program would integrated into the entire company.
“I’m familiar with Eldorado and its management team, having worked with them on a previous transaction, and I look forward to collaborating with them to bring our companies together,” Rodio said.
Caesars Chairman Jim Hunt said in a statement the company’s board, “unanimously concluded that the combination of these two companies creating an even stronger entity is a decision for our shareholders’ consideration and vote for immediate and ongoing value.”
The combined company’s board will consist of 11 members, six from Eldorado’s board and five from Caesars.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
