Eldorado Resorts Buys Caesars Entertainment for $17.3BN

The agreement has been signed, sealed, and delivered. Eldorado Resorts will buy Caesars Entertainment Corporation for $8.5 billion in cash and stock. The massive deal will put Eldorado on its way to being a competitor for casino operators like MGM Resorts, Wynn Resorts, and Las Vegas Sands. The new company will also gain access to online gaming and sports betting outlets.

Reactions have been mixed. The first day of trading on the news showed Caesars stop up more than 11%. Meanwhile, Eldorado stocks are down more than 13%. And in the two days since, not much has changed in the overall outlook via trading.

Eldorado Resorts Acquisition a Big Deal

In March of 2019, Reuters first reported that Caesars and Eldorado were in talks about a possible merger. The two companies had exchanged financial information, but the future of the discussions was unclear at that time.

Previous reports had put MGM Resorts and Golden Nugget owner Tilman Fertitta in the running as well. However, neither of those proposals went as far as Eldorado.

The Reuters news about the finalisation of the Eldorado/Caesars deal came on the morning of Monday, June 24. Eldorado shareholders will hold 51% of the combined shares with Caesars taking 49% after the deal closes in the first half of 2020.

Eldorado took the stock at $13.01 per share, a premium of 51% over Caesar’s trading price on the day before new members of the Caesars board changed its makeup on March 1.

The Caesars purchase is the biggest of Eldorado’s recent acquisitions. These include Tropicana Entertainment for $1.85 billion in 2018, and Isle of Capri Casinos in 2017 for $1.7 billion. And according to the market, Eldorado’s stock price has risen more than 10 times since it went public in 2014. Most analysts are confident that this deal will fall in line, too.

Jefferies analyst David Katz noted, “Eldorado has proven its ability to execute … We expect the long-term positives could prove out.”

Going forward, Eldorado expects to save $500 million in its first year of combined operations. At the same time, it will sell some of its real estate to VICI Properties for approximately $3.2 billion in proceeds.

Icahn-Approved Eldorado Resorts Deal

Billionaire investor Carl Icahn is a name associated with much of the change at Caesars of late. When his Icahn Group became a significant shareholder in Caesars, he managed to secure three spots for directors on the board. He subsequently filled those positions earlier this year.

Icahn also reserved the right, via an agreement with Caesars, to name the new CEO. That happened in April when Anthony Rodio was revealed as the new CEO. Rodio had been the CEO of Tropicana before Icahn sold it to Caesars.

Icahn was reportedly instrumental in approving and assisting in the completion of the Eldorado deal. The entrepreneur has long supported Caesars being open to mergers or a buyout. Icahn has since said that he it was a good deal, stating:

“This merger is in the quintessential example of how an activist shareholder, working collaboratively with the Board, can greatly enhance value for all stockholders. … While I criticized the Caesars Board when I took a major position several months ago, I would not like to do something that I rarely do, which is to praise a board of directors for acting responsibly and decisively in negotiating and approving this transformational transaction.

“As a combined company, Caesars and Eldorado will be America’s preeminent gaming company. It is rare that you see a merger where because of the great synergies ‘one plus one equals five.’ I look forward to seeing our investment prosper.”

Some Concerns Surface

Gaming analyst Matt Kaufman, in his capacity for Eilers and Krejcik, expressed concern about the long-term prospects for Caesars.

“In the short term, the deal benefits Caesars shareholders,” Kaufman told Gambling Insider, “but in the long term I’m pessimistic about this being good for the health of the business. … The synergies between both organizations seem limited, and their approaches to the business are vastly dissimilar.”

Kaufman also noted that Eldorado may want to decentralise power. However, Caesars and other top casino companies operate in an opposite manner. Eldorado’s desire to let each casino run more independently may not be workable going forward to be competitive in places like Las Vegas.

Caesars Windsor Confidence

The one Canadian property potentially affected by this acquisition is Caesars Windsor, which Caesars manages. The Ontario Lottery and Gaming Corporation (OLG) is its owner.

According to CBC News, employees of Caesars Windsor will not be affected. Unifor Local 444 President David Cassidy said he spoke with the Eldorado’s VP of human resources, who understands that the employees have a collective agreement that will remain intact.

OLG Director of External Communications Tony Bitonti commented:

“It remains business as usual at Caesars Windsor.”

It’s currently unclear what will happen when the OLG/Caesars contract expires in 2020, though.

Jennifer Newell

Jennifer Newell

Jennifer Newell has been writing about poker and gambling since 2004. As the online gaming sectors have changed and grown, particularly in the United States and Canada, she has followed it all and written about it for websites like World Poker Tour and PokerScout. In her free time, she runs a small business, reads, cooks, and enjoys music.

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