Last week, Eldorado Resorts in Nevada turned from a regional casino facility into a first-class gaming powerhouse after an announcement that it had reached an agreement to take over the casino behemoth Caesars Entertainment was made.
One of the experts who analyzed the situation, Brian Egger from Bloomberg Intelligence, has explained that it is always unusual when a considerably smaller entity pursues an acquisition or merger with a larger business. Mr. Egger, however, confirmed that despite being a smaller and less popular entity than its counterpart, Eldorado Resorts has been quite acquisitive over the past few years.
One of the most notable acquisitions of Eldorado Resorts in recent years is the one of Isle of Capri Casino and Tropicana Entertainment. Such deals have helped the operator become one of the major participants in the regional casino sector.
Eldorado Resorts agrees to buy Caesars, in a move that would create one of the largest gaming companies in the U.S. https://t.co/ChEhSOvOCQ
— The Wall Street Journal (@WSJ) June 24, 2019
The newly-announced deal for the acquisition of Caesars Entertainment is Eldorado’s largest deal to date. The takeover agreement is worth about $17.3 billion includes $7.2 billion paid in cash, the assumption of the outstanding net debt of Caesars Entertainment, as well as 77 million common shares in Eldorado Resorts. As revealed about a week ago, the combined entities will operate as one under the Caesars brand. They will collectively hold 60 domestic casino resorts and gaming facilities in 16 US states, which would turn it into the largest casino operator across the country.
According to preliminary estimates, once the loyalty programs of the two entities are merged, the combined platform will have about 65 million members.
Eldorado Resorts Has Been Willing to Expand and Bolster Its Gambling Market Presence
One of the main reasons Caesars Entertainment has been so attractive to Eldorado Resorts is its strong presence in Las Vegas, where the brand holds a number of first-class gambling resorts, including Caesars Palace, Harrah’s Las Vegas, the Flamingo Las Vegas, the Linq, Planet Hollywood, Bally’s Las Vegas and Paris Las Vegas. Eldorado, on the other hand, has not been present with any gambling operations in Las Vegas, but the brand currently operates three gambling venues in three cities in Nevada – Reno, Stateline and Laughlin – as well as 26 properties in the states of Louisiana, Indiana, Colorado, Iowa, Illinois, Florida, Ohio, Missouri, New Jersey and Mississippi.
The addition of Caesars’ properties to the portfolio of Eldorado Resorts would provide the latter with primary casino assets which would improve its brand recognition and would bolster its positions across the country, and more specifically, in Las Vegas. The operator has been willing to get a presence in the “gaming capital”.
Considering the fact that Caesars Entertainment’s operations have been struggling with declining value and increasing debt over the past few years, analysts say that Eldorado Resorts could actually be a suitable solution for the situation. On the other hand, after the acquisition of the Isle of Capri and Tropicana Entertainment, the operator has been considering various options to increase its overall profit margins.
Combined Gambling Operator Could Face Regulatory Scrutiny
The recently proposed deal will probably face scrutiny at the time when it undergoes an antitrust review with the Federal Trade Commission (FTC) due to the dominance the merged operations would have in a number of markets.
According to the president of the Gaming USA Corp. consultancy group, Alan Woinski, the combined entity is not likely to get antitrust approval in some states and destinations the way the companies plan to merge to date. Mr. Woinski has explained that the merged company might be forced to sell one or two properties in Atlantic City and the state of Louisiana, as the FTC could not be willing to allow such a strong concentration of one company’s gambling properties in the state of Nevada or on the West Coast.
Eldorado Resorts agrees to buy rival Caesars for about $8.5 billion in cash and stock, as it looks to build scale to take on larger companies like Las Vegas Sands and Wynn Resorts https://t.co/uJSrmYf0zG pic.twitter.com/OEREakO6Wp
— Reuters Top News (@Reuters) June 24, 2019
In fact, Eldorado Resorts has already revealed plans to offload its real estate properties after the merger, mostly in terms to Harrah’s Laughlin Hotel and Casino, Harrah’s Resort Atlantic City and Harrah’s New Orleans Hotel & Casino, all of which are currently operated by Caesars Entertainment.