After clearing all regulatory hurdles, Nevada casino operators Caesars Entertainment Corp. and Eldorado Resorts on Monday announced that they have completed their combination to create the largest casino and hospitality company in the US by number of properties.
The enlarged group now operates and trades as Caesars Entertainment, Inc. and its portfolio comprises more than 55 hotel and casino resorts across 16 states and in other counties, including the iconic Caesars Palace on the Las Vegas Strip.
Eldorado announced last June that it would acquire the larger Caesars in a deal that values the now combined group to around $17.3 billion including debt. That announcement put an end to months of speculations about the fate of Caesars after New York activist investor Carl Icahn had built a majority stake in the Las Vegas casino giant to push for its sale/merger with another company.
Mr. Icahn is the largest shareholder in the new Caesars with a 10% stake.
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The recently closed tie-up has transformed Eldorado from a regional casino operator to a gaming and hospitality powerhouse with a Las Vegas Strip address.
Commenting on the mega-deal, Tom Reeg, CEO of the enlarged Caesars and of the former Eldorado, said in a Monday statement that they are:
pleased to have completed this transformative merger, thus making us the premier leader in gaming and hospitality. We look forward to executing on the numerous opportunities ahead to create value for all stakeholders.
The merger of Caesars and Eldorado has also enlarged the former’s Caesars Rewards making it the largest loyalty program in the sector with more than 60 million members worldwide.
What Lies Ahead
Despite all the positives that a company of the enlarged Caesars’ portfolio and reach can offer, Mr. Reeg and his team will have the challenging task to navigate the group through an extremely tough operating environment occasioned by the worst health crisis the world has faced in many years.
In addition, Caesars’ management will also have to deal with a behemoth debt of nearly $9 billion. Mr. Reeg’s team has maintained that the combined group would feel $500 million in savings in the first year after the Caesars-Eldorado marriage, but many on Wall Street have voiced skepticism about the achievability of that goal.
One of the ways to achieve that “magic” number will be job redundancies. Both Caesars and Eldorado have been cutting jobs since the deal was announced. The Covid-19 pandemic and the ensuing nationwide casino closures resulted in more lay-offs and furloughs at both companies and that will certainly continue in the months to come.
It should also be noted that most of the executive jobs at Caesars gave way to their Eldorado counterparts after the deal closed, the enlarged group’s COO, Anthony Carano, said Monday.
Mr. Carano could not provide an exact head count of how many of their employees were laid off, but noted that “the hardest part in getting to the finish line was definitely having to furlough about 90% to 95% of our workforce in April of this year” and that while “that was a terrible day for both companies”, he was “very excited about how the business is coming back and how we are able to bring back our teams in a safe manner.”
Offloading Properties
Caesars is also set to reduce its property portfolio. To secure regulatory approvals, the company’s management has agreed to offload casinos in several states, including Indiana, Louisiana, New Jersey and Nevada.
Caesars and Eldorado needed approvals from the regulators in all 16 states where the now enlarged group operates properties as well as from the Federal Trade Commission. Several regulatory bodies and the FTC expressed concerns on the impact of market concentration the mega-merger would have and have placed property sales as conditions for regulatory approvals.
Company management agreed to all these conditions and even said that the combined group could sell a Las Vegas Strip property in future. Mr. Carano noted Monday that there “certainly have been buyers expressing interest” in Caesars’ Strip casino resorts, but they “want to get to know the teams at each property and determine which property we’ll sell at a later time.”
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