Eldorado has reportedly embarked on a cost-cutting quest before making an official bid to combine with Caesars’ casino empire
Caesars Entertainment Corp might be pressured to mass layoffs, including parting ways with members of its executive suite, as Eldorado Resorts is exploring ways to reduce its larger rival’s costs by at least $500 million before making an official offer to buy it, The New York Post reported Tuesday.
Eldorado and Caesars confirmed that they were in early merger talks back in March. Little has been disclosed on the progress of those talks since then. It has only become known that Caesars has provided Eldorado with access to its financial data so that the latter can conduct due diligence.
A source familiar with the developments surrounding a potential mega-deal told The Post that Eldorado’s CEO, Tom Reeg, has been looking for ways to slash Caesars’ expenses by at least half a billion before moving forward with combining his business with that of the Las Vegas casino powerhouse.
Sources believe that Mr. Reeg will only make an offer if he secures $500 million in costs savings. If he fails in that endeavor, he is expected to walk away. Sources also told The Post that the Eldorado CEO’s quest is not likely to succeed and that it is part of a “desperate bid” to offset the risk related to the acquisition of the debt-laden Caesars.
Caesars’ worth currently stands at around $24 billion, including a massive debt and equity. While Eldorado generates about a quarter of Caesars’ annual revenue, it performs much better in the operating costs department.
Largest Shareholder Presses for Cost-Cutting Initiatives
Caesars announced back in March that it has decided to lay off corporate workforce to cut annual costs by around $40 million. Many of the eliminated jobs would be positions that are already vacant. The company’s headquarters in Las Vegas are where most of the affected employees are based.
It has also emerged that Caesars’ largest stockholder, Carl Icahn, has been eager to reduce the company’s $332 million corporate expenses. The New York activist investor has also been the main man behind the casino and hotel operator’s effort to sell itself or merge with another gaming and hospitality business.
Mr. Icahn has built a 28.5% stake in Caesars over the past several months and has pointed out that a sale or a merger could be the best path forward for the Las Vegas casino powerhouse.
It has emerged that Texas billionaire and owner of the Golden Nugget chain of casino properties, Tilman Fertitta, has too expressed interest in buying Caesars. According to sources familiar with the matter, the businessman has been reaching out to anyone with “deep pockets” to secure the necessary financing to buy the Las Vegas giant and combine it with his own gambling business.
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