Eldorado Resorts is still committed to selling several casino properties following the Reno-based company’s $17.3 billion merger with Caesars Entertainment, but CEO Thomas Reeg wasn’t tipping his hand last week.
On the company’s third quarter earnings call with analysts last Wednesday, Reeg said Eldorado still intends to sell one of the nine Las Vegas casinos the company is acquiring from Caesars as part of the merger, which is expected to close early next year.
Eldorado CEO Thomas Reeg
“That remains the case,” Reeg said during a question and answer session. “And then our intention is to see how did that sales process go? How did that impact the system once that property was removed from it? And we’ll make decisions from there.”
One property off the table is the off-Strip Rio resort in Las Vegas. Caesars agreed in September to a $516.3 million sale-and-leaseback of the property to a company controlled by a principal of Imperial Companies, a New York-based real estate group.
Caesars will continue to operate the Rio for a minimum of two years under the lease agreement, and the property will remain part of the Caesars Rewards network.
Reeg said last month’s announced sale/leaseback of the Bellagio by MGM Resorts International for $4.25 billion to Blackstone’s real estate investment trust, gave him confidence in the Strip marketplace.
“That’s the tip of the iceberg,” Reeg said. “We think there’s going to be others that are interested as well. We think that will improve the value of our assets, but we want to manage our leverage down, (which is) why we are talking about selling an asset quickly post-closing the transaction, but we’re not in a hurry to run and sell assets.”
Separately, Eldorado announced casino sales in June and July that would seemingly help alleviate any federal anti-trust issues arising from the merger with Caesars in certain markets. Combined, the companies currently operate 60 properties in 18 states.
In June, Eldorado sold three properties – two in Missouri and one in Mississippi – to VICI Properties and Century Casinos for $385 million. A month later, the company sold the Isle of Capri Casino Kansas City in Kansas City, Missouri and the Lady Luck Casino Vicksburg in Vicksburg, Mississippi for $230 million to Twin River Worldwide Holdings.
Both deals are still pending regulatory approvals.
Reeg told analysts two additional locations for potential casino sales were Louisiana, where Eldorado owns Eldorado Shreveport and Caesars operates Horseshoe Bossier City; and Lake Tahoe, Nevada, where Eldorado has Mount Bleu and Caesars operates Harrah’s Lake Tahoe and Harvey’s.
“We’re working through the process,” Reeg said. “We’ve talked to you about markets where you should expect us to be active, in Northwest Louisiana and in the Tahoe area. Beyond that, we’re not expecting any divestitures preclosing that are related to closing the transaction.”
In response to a question, Reeg said the potential sale of any Atlantic City properties, where the combined company will operate four of the market’s nine casinos, was still under consideration.
Union Gaming Group analyst John DeCree told investors Eldorado’s recent deals involved non-core assets.
“We expect one or two more smaller asset sales ahead of closing to avoid (Federal Trade Commission) issues,” DeCree said. “Post-closing, the company remains committed to monetizing a Strip asset to both accelerate deleveraging and reduce Strip exposure. With real estate values on the Strip trending higher, we remain confident Eldorado will have no trouble selling a Vegas Strip property for a very full multiple.”
Reeg said Eldorado still intends to slice some $500 million in costs once the merger is completed early next year.
On Caesars’ quarterly conference call, a day earlier, CEO Tony Rodio said the company expects to reduce costs by $75 million to $100 million by the time the merger closes.
Reeg said Caesars and Eldorado are both still operating as independent companies, but current cutbacks, which include reducing the number of leased slot machines, eliminating contracts for outside contractors and professional services, ending the bidding process for a gaming license in Japan, and reducing jobs at the corporate level, were material decisions.
“You should expect that some of what Tony is tackling are things that we would have started tackling at closing, so we get to accelerate that a little bit and see the benefits quicker than we have in other transactions,” Reeg said. “We feel very good about what we’re buying and our ability to create value from those assets moving forward.
Shareholders from both companies will vote on the deal on Friday. Once the deal closes, Eldorado will become the managing company, although the merged business will retain the Caesars name.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
