The $17.3 billion merger agreement between Eldorado Resorts and Caesars Entertainment is nearing completion more than a year after the transaction was first announced.
On Wednesday, the Nevada Gaming Control Board and Nevada Gaming Commission will consider approval of the merger, which could have lasting implications for several properties on the Las Vegas Strip and other markets in the state.
On Friday, Indiana gaming authorities will take up the deal, which could lead to the sale of two of the state’s five casino properties that are involved with the transaction.
Reno-based Eldorado is the acquiring company in the transaction, which will create a regional gaming giant with nearly 60 properties in 16 states. Eldorado’s management will control the merged operation with CEO Tom Reeg overseeing the combined company that will retain the Caesars’ name.
On June 26 – 367 days after the deal was first announced – the Federal Trade Commission conditionally signed off on the merger pending the sale of two Eldorado-operated casinos in Lake Tahoe, Nevada, and Shreveport, Louisiana, which would clear up antitrust issues.
Last week, Twin River Worldwide Holdings completed its $230 million acquisition of Eldorado’s Isle of Capri Casino in Kansas City, Missouri, and Lady Luck Casino in Vicksburg, Mississippi, another transaction required by the FTC.
In a June 26 research note, SunTrust Robinson gaming analyst Barry Jonas told investors he expects gaming regulators in Nevada, Indiana, and New Jersey – which has not scheduled its hearing on the matter – to approve the transaction. The companies already received approval in nearly a dozen states.
The FTC voted 3-1-1 to accept the terms of the complaint and consent order, with one commissioner not participating.
Commissioner Rohit Chopra voted no and issued a dissenting opinion, questioning Twin River’s ability to complete the purchase of the transactions. He also said there were “no noteworthy benefits to customers, workers, suppliers, or competition” from the merger, adding ‘the transaction is risky for everyone involved.”
Chopra was also concerned with the amount of debt Eldorado will carry post-transaction, especially in the current COVID-19 era. Eldorado had nearly $3 billion in debt on its books at the end of March. That figure will jump to almost $13 billion once the companies are merged.
However, the roughly $12 billion in long-term lease payments Eldorado will owe to real estate investment trusts Gaming and Leisure Properties and VICI Properties increases the company’s total debt load to some $25 billion. Analysts said the investment community and common accounting principles count leases as debt.
“Ticking fees” of an estimated $2.3 million that began on April 1 because the deal wasn’t completed by the end of March – due to the COVID-19 pandemic – are adding additional costs to the transaction.
Reeg, in a statement last week, said casino sales will help to alleviate debt going forward. Eldorado currently does not own a casino in Las Vegas but will acquire eight Strip properties as part of the transaction. Last year, Caesars sold the Rio in Las Vegas to a New York investment and will operate the property at least through the end of the year.
When the merger was announced in June 2019, Reeg suggested the company would sell one or two of the Caesars-operated Strip casinos.
“We will do an analysis to see if we are better off keeping what we have on the Strip. Are we better having all that room inventory?” Reeg said. “As I sit here today, there is more Strip exposure than we need. I would expect we would be a seller of Strip assets….” Later in the year, he said the casinos wouldn’t be sold until the merger closes.
Caesars sold Harrah’s Reno in January to a real estate developer who planned to convert the site into a mixed-use non-gaming project. The aging downtown casino was closed in March as part of the statewide gaming shut down due to the coronavirus pandemic and the developers last month said the resort would not reopen. In Reno, Eldorado operates the three properties – Eldorado, Silver Legacy, and Circus Circus – which are collectively referred to as “The Row.”
In Lake Tahoe, Eldorado is selling the operations of MontBleu Resort Casino to Twin River and will retain ownership of the Caesars-operated Harrah’s and Harvey’s in the picturesque community at the state line with California. Twin River is also buying Eldorado Shreveport as part of the MontBleu deal for a combined $155 million.
After the merger closes, Eldorado will own two resorts in Laughlin, Nevada – Tropicana Laughlin and Harrah’s Laughlin.
In Indiana, Eldorado officials said the company would likely sell two of the five Indiana casinos the company will control post-merger.
Four of the five casinos are currently owned by Caesars – Hoosier Park in Anderson, Indiana Grand in Shelbyville, Horseshoe Hammond, and Horseshoe Southern Indiana in Elizabeth. Eldorado owns Tropicana Evansville.
Shares of Eldorado, traded on the Nasdaq, closed at $39.53 Monday, down $1.67 or 4.05%. Caesars shares, traded on the Nasdaq, closed at $12.09, down 21 cents or 1.71 %.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
