Sports betting configuration from Eldorado-Caesars merger still being determined

March 2, 2020 12:00 PM
  • Howard Stutz, CDC Gaming Reports
March 2, 2020 12:00 PM
  • Howard Stutz, CDC Gaming Reports

Eldorado Resorts CEO Tom Reeg has cautioned the investment community not to jump to any conclusions about the regional casino operator’s expanding sports betting business.

Once the $17.3 billion acquisition of Caesars Entertainment is complete, it may take a while to sort through what Reeg acknowledged last week was a business “that should be driving value decades down the road.”

Eldorado and Caesars come into the merger with separate and potentially competing sports wagering agreements. Eldorado’s executive team, which will assume management of the combined company that plans to retain the Caesars Entertainment name, is calling the shots.

When the deal was announced last June, Reeg said he liked several of the sports betting and sports partnership deals Caesars has signed. On last week’s fourth-quarter conference call, the CEO emphasized that there were still plenty of details to work through.

“We’re not driven by the ego of who controls it,” Reeg said. “We’re looking for what’s the best economic outcome and we want to ensure the business is run in the best manner it can possibly be run.”

Sports betting deals

A year ago, Eldorado completed a partnership agreement with William Hill US, the American subsidiary of UK-based sports betting giant William Hill. Reno-based Eldorado gained a 20% ownership stake in the business in exchange for a 25-year deal to operate sports betting in the company’s casinos where the activity is legal.

Eldorado CEO Thomas Reeg

Meanwhile, Caesars has its own deals, including a marketing agreement with the National Football League that doesn’t include sports betting and agreements with Turner Sports and ESPN to place television studios focused on sports wagering in Las Vegas at Caesars Palace and The Linq. Caesars also signed a deal with DraftKings that includes market access for online gaming products, such as mobile sports wagering.

Caesars currently operates 29 sportsbooks in seven states – Nevada, New Jersey, Iowa, Indiana, Mississippi, Pennsylvania, and New York – and expects to launch operations sometime this year at the two Harrah’s casinos in North Carolina.

The Eldorado/William Hill partnership has sportsbooks in four states – Nevada, New Jersey, Iowa, and Indiana. Colorado and Illinois, where Eldorado has properties, are expected to launch this year.

A day after the Eldorado-Caesars merger was announced, William Hill said its strategic partnership with Eldorado gave its U.S. subsidiary the right to oversee sports betting at casinos being acquired in the Caesars transaction.

William Hill US CEO Joe Asher declined to comment on the Eldorado-Caesars deal, which could close in the first half of this year. The combined company will have roughly 60 gaming properties in 18 states.

Reeg told analysts the sports betting issue won’t be resolved quickly.

“I would not expect it to take until 2021, but I also wouldn’t expect it to happen three weeks from now,” Reeg said.

Jefferies gaming analyst David Katz told investors that Eldorado “remains optimistic for the sports betting prospects, which should continue to take shape in the near term.”

Growing business

Sports betting is now legal in 14 states, with six additional states and the District of Columbia expected to launch this year. William Hill announced a sports betting deal last week with a tribal casino in Michigan, a state in which Caesars and Eldorado don’t currently have operations.

The company also struck a partnership agreement in February with CBS Sports that makes William Hill the official sports betting partner and wagering data provider for all of the network’s online platforms.

The sportsbook operations at the nine Caesars-operated properties in Las Vegas could be an issue. The current Eldorado entity does not have a resort in Las Vegas, and William Hill operates the sportsbooks at Sahara and Circus Circus. Through its pending buyout of rival CG Technology, the company is picking up sportsbooks at three other Strip casinos.

National player

Reeg said the William Hill partnership was done to help Eldorado become a national player in sports betting. “As it sits today,” he said, the Caesars sportsbooks “would go into that deal and the waterfall would be the same as our sports betting properties.”

The combined Eldorado-Caesars entity is figuring out how to structure a deal that includes “what Caesars brings to the table … the Caesars brand name, the power of the (Caesars Reward) database, (and) the execution that William Hill brings.”

The goal, Reeg said, is to reduce customer acquisition costs and increase market share.

“We’re not going to run out and do something in two weeks because we like our stock market valuation. We’re going to do it in a thoughtful manner,” Reeg said. “We are going to come out of it with a business that can take a leadership position in the space.”

Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.