After two days of testimony, the New Jersey Casino Control Commission seems not to be entirely sold on the proposed $17.3 billion tie-up of Nevada casino operators Eldorado Resorts and Caesars Entertainment Corp.
The commission is the last regulator that is supposed to rule on the mega-deal before it closes, but moving past this final hurdle is not exactly a smooth sail for Eldorado and Caesars.
The regulator’s two members heard five Eldorado executives on Wednesday, including the company’s CEO, Tom Reeg. Mr. Reeg will step in as CEO of the combined group when Eldorado’s takeover of Caesars closes.
On Thursday, the commission heard two economists who presented differing opinions on the impact the deal will have on Atlantic City’s casino market. After hearing the two experts, the New Jersey Division of Gaming Enforcement, which needs to recommend the deal before the commission makes its final decision, said that “uncertainty associated with the transaction” remains.
Deputy Attorney General Tracy Richardson said on behalf of the division that the regulator had its reservations due to the impact of the coronavirus on the state gaming and tourism industries, the financial impact of casino capacity restrictions, and the timetable for market recovery.
Division Recommendations
In its report on the merger, the Division of Gaming Enforcement included several recommendations that Casino Control Commission members should consider if the deal is to be given the green light. These included a condition for the combined casino group to invest at least $400 million into upgrading its Atlantic City properties over the next three years.
The division also recommended that the enlarged company lift existing deed restrictions on casino gambling on properties Caesars had previously owned, including the Showboat, The Claridge, and Atlantic Club Casino Hotel.
Mr. Reeg said on Wednesday that the “new Caesars” would adhere to both of the above conditions. The combined company will operate and trade as Caesars Entertainment Inc.
What Economists Say
As mentioned earlier, the Casino Control Commission heard opinions from two economists during the Thursday hearing. Eldorado attorney used analysis from Timothy Watts, Managing Director of National Economic Research Associates Inc., to convince New Jersey regulators that they should approve the deal.
Mr. Watts concluded in a report on the transaction that it would not result in “undue economic concentration” of casino resorts in Atlantic City. When Eldorado and Caesars merge, the combined company will operate Tropicana Atlantic City, Caesars Atlantic City, and Harrah’s Atlantic City. Caesars agreed to sell Bally’s to Twin River Worldwide Holdings in April for $25 million. The deal is pending regulatory approval.
Martin Perry, head of the economics department at the University of Illinois at Urbana-Champaign, was the other economist to provide an opinion on the matter. Mr. Perry offered several recommendations that would reduce the market share of the newly combined casino company.
One of these recommendations involved the sale of one larger casino or two smaller casinos. The economist said that the sale of Bally’s would have the least impact on reducing the new company’s market concentration.
The Casino Control Commission will hear more testimony today and its two members – Chairman James Plousis and Commissioner Alisa Cooper – are likely to vote after that. Today’s meeting is set to begin at 10 am local time.
Follow us on Facebook and Twitter to stay up to date on the day’s top casino news stories
