Details of the purchase
Eldorado Resorts is buying Caesars Entertainment in a stock and cash deal that is worth upwards of $17.3bn (￡13.6bn). Once it goes through, the merged company will be the biggest gambling firm in the United States. Eldorado will pay about $7.2bn (￡5.65bn) in cash and 77 million shares. This sees all of Caesars’ properties and naming rights going to the Eldorado brand. They will be taking charge of any outstanding debt that Caesar’s currently possesses.
Eldorado’s shareholders will own a 51% controlling interest in the new company. The Caesars name will be retained but upper management will come from Eldorado, including CEO Tom Reeg and Chairman Gary Carano.
In a side deal worth $3.2bn (￡2.5bn), the VICI Properties company will acquire the real estate assets of three Harrah’s locations from Eldorado. VICI will pay about $1.8bn (￡1.4bn) in cash and will be the rent collector. Rents are expected to bring in about $154m in the first year.
Big move by Eldorado
Eldorado Resorts currently operates 26 gambling facilities across the country. After this deal is completed, the company will take control of properties under the Bally’s, Harrah’s, and Caesar’s brands, bringing its total ownership to 60 facilities in 16 different states.
CEO Tom Reeg said: “Together, we will have an extremely powerful suite of iconic gaming and entertainment brands as well as valuable strategic alliances with industry leaders in sports betting and online gaming.”
There have been rumors of this merger for a number of months. The CEO of Caesars Entertainment, Anthony Rodio, has only been in the position for two months. The annual meeting for shareholders for Caesars was scheduled for June 24, but it has been postponed to July 2, allowing shareholders time to educate themselves about the deal.
Eldorado put a valuation of $12.75?(￡10.01) on Caesars’ shares, which had been trading at little under $10 (￡7.85) when trading closed on June 21. Eldorado will be paying $8.40 (￡6.60) a share in cash, with the rest of the payment made in Eldorado shares.
Shareholders of both companies still need to approve the sale, which also has to be approved by trade and gaming regulators. This likely will not happen until early next year.
Background to this sale
Billionaire investor Carl Icahn gradually took control of Caesars, constantly buying more shares until he owned more than 10% of the company. He then had to obtain a gaming license as per Nevada law.
Icahn controlled several board seats and was able to appoint a CEO who had his seal of approval. The share price rose significantly when Icahn’s involvement was disclosed.
Rumors were constantly floating around that Icahn wanted to sell the company and wasn’t wasting any time. Two likely purchasers were identified; Eldorado was one of them.
The other was Tilman Fertitta, the billionaire owner of the Golden Nugget Casino franchise and the Houston Rockets NBA team. There were reports that he got the seal of approval to conduct due diligence on Caesars. He had engaged in merger talks during 2018 but was not successful.