Eldorado Resorts has agreed to merge its casino business with Caesars Entertainment Corp. in a cash and stock deal that values the latter company to $18 billion, sources familiar with the ongoing deal talks said on Sunday.
News about the two operators’ merger arrive a few months after it first emerged that they have engaged in consolidation discussions. At press time, the combination is yet to be confirmed by Eldorado and Caesars.
The deal values Caesars at nearly $13 a share, sources said. Ownership of the combined entity would be split roughly between the two casino operators. The price is almost in line with what Caesars has been understood to have expected from a potential buyer.
Earlier this month, reports emerged that the Las Vegas giant’s largest shareholder – New York businessman Carl Icahn – and the company’s board were at odds over the sale price. Mr. Icahn was understood to have pressed Caesars to finalize merger talks with Eldorado even at a price lower than the $13 a share it sought. However, the company’s board reportedly looked to squeeze from Eldorado an offer that “is right for all shareholders.”
Merger talks between Eldorado and Caesars started in March. It was reported back then that Caesars has allowed Eldorado access to its financial information.
Caesars has been pressed to sell itself or merge with another business by its largest shareholder. Mr. Icahn currently owns 28.5% of company shares. He started building his stake in the major casino operator early this year. According to the activist investor, a sale or a merger was the best path forward for Caesars, which currently has a mountain of net debt and is looking to cut costs significantly.
The Combined Entity
As mentioned earlier, the merged company’s ownership is likely to be split between the two casino operators. According to previous reports, Eldorado’s CEO, Tom Reeg, would step in as Chief Executive of the newly formed business.
Mr. Reeg’s leadership skills are believed to be highly valued by Mr. Icahn. The Eldorado boss played an important role in the company’s acquisition of Mr. Icahn’s casino business. Last year, the gaming and hospitality operator purchased Tropicana Entertainment Inc. from the New York activist investor in a $1.85 billion deal.
Eldorado has a market value of around $4 billion. The company operates 26 properties in 12 states. It recently obtained a permanent license to operate Tropicana Atlantic City, one of the properties it bought from Mr. Icahn in 2018.
As for Caesars, its portfolio includes 53 gaming and non-gaming resorts in 14 US states and five other countries. In the US, the company operates the Harrah’s and Horseshoe casino brands, among others. It emerged from a long and complex bankruptcy in the fall of 2017.
The combination of the two resorts would create a land-based casino powerhouse with ambitions to expand its presence across multiple jurisdictions and to cement itself in the recently liberalized US sports betting market.
Eldorado and Caesars’ combination could see a bit of regulatory trouble. In Atlantic City, for example, the merged entity will run four of the city’s nine operational casinos. This nearly monopolistic situation is not likely to appeal to regulators and the merged business could be asked to offload some of its properties.
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