Rhode Island-based Twin River Worldwide Holdings said Friday it was acquiring three casino properties currently operated Eldorado Resorts and Caesars Entertainment for a combined $180 million in separate transactions that would seemingly help the two companies move along their pending 10-month-old $17.3 billion merger agreement.
In separate deals, Twin River said it will acquire Eldorado Shreveport in Louisiana and the MontBleu Resort Casino in Lake Tahoe, Nevada from Eldorado for a combined $155 million. The transaction canceled Eldorado’s previously announced sale of the two properties to Las Vegas-based Maverick Gaming.
Twin River is also buying Bally’s Atlantic City from Caesars and real estate investment trust VICI Properties for $25 million.
The two deals are all subject to approvals by state gaming regulators and the Federal Trade Commission.
For Twin River, the transactions expand the company’s footprint into three new states. Twin River currently operates seven casinos in four states – Rhode Island, Mississippi, Delaware, and Colorado.
“These acquisitions represent a unique opportunity to continue executing on our expansion and diversification strategy at attractive valuation multiples,” Twin River CEO George Papanier said in a statement. “We see significant opportunities to create cross marketing connections for customers at multiple Twin River locations, and we look forward to applying our proven operating and integration approach to drive incremental revenues and cash flows.”
For Eldorado, in canceling the previously announced deals with Maverick Gaming, the company is getting a lower price for the two casinos. Maverick had agreed to pay $230 million the Shreveport hotel-casino and an undisclosed price for MontBleu.
“We think this transaction, given the financing circumstances of Twin River, despite the financial haircut, is a distinct positive for Eldorado as it pertains to getting to the finish line with the Caesars acquisition,” Deutsche Bank gaming analyst Carlo Santarelli told investors Friday morning. “We expect the acquisition of Caesars to close late in the second quarter of 2020.”
Regulatory agencies from Nevada, New Jersey, and Indiana still need to approve the Eldorado-Caesars deal, along with the FTC.
Jefferies gaming analyst David Katz said the relatively low price for the three casinos should not be a concern for investors. The low value was a means to satisfy the FTC and regulators and get the transaction closed.
“The sales were primarily focused on satisfying regulatory analyses of concentration, thus the ability to complete the sales is more important than the terms,” Katz said.
All three properties are currently closed due to the nationwide shutdown of the casino industry in response to the COVID-19 coronavirus pandemic. Twin River said it would fund the transactions with a combination of cash and expanding its existing credit facility.
“Despite the uncertainties presented by the current health crisis, we continue to execute our strategy to position Twin River for long-term growth and profitability,” Papanier said. “Completion of these transactions will meaningfully enhance our financial profile while strengthening our presence in a number of key geographic markets.”
Combined, the three properties have 3,318 slot machines, 176 table games, and 2,092 hotel rooms. Twin Rivers noted Eldorado Shreveport has 6,000 square feet of convention space.
The Shreveport and Mont Bleu transaction is expected to close in the first half of 2021. The Bally’s transaction is expected to close in late 2020 or early 2021.
Harrah’s and Mount Bleu Hotels in South Lake Tahoe as seen on Tuesday, Oct. 8, 2019. (David Calvert/The Nevada Independent)
Eldorado deal
In a statement, Reno-based Eldorado Resorts said it terminated its previously announced agreements for the Shreveport property and MontBleu to Maverick Gaming and returned the company’s deposits.
“The agreement to divest Shreveport and MontBleu to Twin River Worldwide Holdings is consistent with our continued focus on closing the Caesars transaction in the first half of 2020,” Eldorado CEO Tom Reeg said in a statement.
MontBleu has 438 hotel rooms and selling the operations was contingent on meeting FTC requirements for the Eldorado-Caesars deal. Las Vegas-based Caesars owns the South Lake Tahoe’s market’s two dominant properties, Harvey’s Resort and Harrah’s Tahoe, which are connected via a pedestrian tunnel underneath Highway 50. Eldorado controlled MontBleu.
Eldorado had leased the property under a 15-year lease from Edgewood Companies, which owns MountBleu’s land and buildings. Edgewood owns the nearby Edgewood Golf Course. Twin River said it entered into an amended agreement with MontBleu’s landlord, including the extension of the lease term to the end of 2035.
The Shreveport deal gives Twin River a substantial location in Louisiana with a 400-room hotel-casino.
In a statement, Maverick Gaming said it was “more important” to protect the company’s casinos and card rooms in Nevada, Colorado, and Washington before expanding.”
“We have worked closely with our lenders and our existing cash position gives us adequate liquidity through the first quarter of 2021 without additional action,” Maverick CEO Eric Persson said in a statement. “We like everyone else, look forward to the day our economy can restart again, our valued Maverick employees can start working, and our company can start to compete”
Bally’s Atlantic City transaction
Twin River will pay Caesars $6 million for the operations of Bally’s Atlantic City and $19 million to VICI, which owns the land and building for the 1,251-room hotel-casino on the Atlantic City boardwalk. Twin River is also acquiring the license to build out a sportsbook and launch online sports betting and I-Gaming in the market.
Post-merger, Eldorado will control three Atlantic City properties: Tropicana, Caesars, and Harrah’s.
“Ultimately, we view the announcements as incremental progress towards closing,” Katz said.
Caesars will continue to operate Bally’s Atlantic City until the transaction closes.
“We look forward to the reopening of Bally’s Atlantic City as soon as appropriate once the public health emergency related to COVID-19 has passed,” Caesars CEO Tony Rodio said in a statement. “We appreciate Twin River’s commitment to this property, which has a great future ahead under its stewardship.”
VICI President John Payne said the sale allows the gaming REIT to maintain the financial terms of its master lease with Caesars and balance the company’s geographic diversification.
VICI has fully financed its portion of the Eldorado-Caesars deal. The company will purchase three Caesars properties under the Harrah’s brand in Atlantic City, Laughlin, Nevada, and New Orleans for a combined $1.8 billion. VICI will lease the operations back to Eldorado for a total annual rent of $154 million once the deal closes.
Shares of Eldorado closed at $17,82 Friday, up $2.24 cents or 14.38%, and shares of Caesars closed at $8.87, up 81 cents or 9.98%. Twin River shares closed at $13.69, up to $2.12 or 18.32%.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
