Caesars Potential Merger With Eldorado Resorts

Caesars Palace Eldorado Resorts

Multiple reports indicate that Caesars Entertainment Corporation is moving closer towards a deal to merge with Eldorado Resorts Inc. Naturally, the deal is contingent upon financing and could still go by the wayside before coming to fruition.

This isn’t the first time there have been rumblings of a deal to merge for Caesars. Last year, Tillman Fertita, a billionaire investor whose holdings include the Golden Nugget casinos, made an offer to merge which was ultimately rejected by Caesars.

Fertita is said to still be interested in a deal, but he now has some company in the form of Eldorado. Eldorado Resorts has been growing at a fast clip of late and has made a number of acquisitions in recent years. Today, Eldorado operates 26 properties across 12 states.

Deals of this nature are typically quite fluid, so we’ll have to wait and see what ultimately materializes. In the meantime, let’s take a look at how Caesars got to this point, as well as what both sides bring to the table.

How did Caesars get here?

Global gaming giant Caesars traces its roots all the way back to 1937. William F. Harrah owned and operated a bingo parlor in Reno, which would eventually transform and become Harrah’s Reno. Additional properties followed, including Harrah’s Lake Tahoe.

The company continued to expand and went through a few ownership changes after the passing of Harrah in 1978. Fast forward to 2005, and Harrah’s would expand once again with the purchase of Caesars Entertainment for $10.4 billion.

What followed was a series of complex transactions, including a stint in which the company went private. The entity’s name was changed from Harrah’s to Caesars Entertainment Corp. during this span. More recently, the company has entered the online gaming market via Caesars Online and Harrah’s Online in New Jersey.

Hard times would come in the form of a Chapter 11 bankruptcy filing in 2015. Investor Carl Icahn has accumulated a roughly 15 percent stake in the company through the years. According to numerous reports, his hope is that the company will sell itself.

It’s beginning to look like he may get his wish, albeit via a merger agreement.

The backstory on Eldorado

Back in 1973, the Eldorado Hotel in Reno would open its doors. Among the early investors was the Carano family, which still holds a 14 percent stake in the company which has grown to be the publicly traded Eldorado Resorts Inc.

The company has expanded tremendously since its early roots. Among the larger transactions was a reverse merger with MTR Gaming Group in 2013. That move would expand the company’s footprint to Ohio, Pennsylvania, and West Virginia.

In 2017, Eldorado swung a massive $1.7 billion deal to acquire Isle of Capri Casinos. The deal expanded the Eldorado empire by 12 additional casinos. The following year, Eldorado picked up the operating business of Tropicana Entertainment for $640 million.

The company now operates even more properties as a result, including the flagship Tropicana Atlantic City. Eldorado is far from done with its growth spurt. The company also has its eyes on the pending online gambling boom via a partnership with The Stars Group. 

All told, Eldorado operates 26 casinos that are spread across 12 different states. Several of the casinos bear the Eldorado name, while others remain under the Isle of Capri brand.

There are also a number of standalone properties in the portfolio, including Circus Circus Reno and Mountaineer Casino Racetrack and Resort in West Virginia. From a single hotel in Reno, Eldorado has grown and established itself as a major player in the casino world.

If a deal with Caesars goes through, then Eldorado goes from major player to one of the premier entities in the industry.

What would a merged entity look like?

Rumors on a potential deal say that Caesars shareholders would receive about $11 a share if a deal comes to pass. The company is currently valued at around $9.75 per share, so the deal would give Caesars Entertainment a valuation of over $7.4 billion.

Eldorado is trading at over $52 per share as of this writing, which gives the company a market capitalization of roughly $4.05 billion. Said another way, if this deal achieves liftoff, we will be looking at a massive combined entity.

Among the properties under the Caesars umbrella are Caesars Palace in Las Vegas, Caesars Atlantic City, and Caesars Dubai. Also in the portfolio are various Harrah’s properties across the United States, as well as several which operate under the Horseshoe brand.

In Nevada alone, there are 13 properties in the family. In addition to Dubai, Caesars has an international footprint in Canada, Egypt, England, and South Africa. Add it all up, and Caesars Entertainment has 51 properties in the fold.

As for Eldorado, its 26 properties are spread across 12 states. From its roots in Reno, the company has spread its wings to states including Florida, Illinois, Missouri, and Mississippi. The company’s operating agreement with Tropicana gives it even more reach in states such as NJ.

If the two companies were to combine, that would make for 77 properties in total. While many are located in the United States, Caesars has quite the international presence with eight properties in England alone.

Quite simply, the deal would be a game-changer for the casino industry as a whole, not to mention both companies. For Caesars, we’re talking about a company that has had its share of financial struggles through recent years. From Chapter 11 bankruptcy to rumors of takeovers and mergers, it has been a long road for Caesars and its shareholders.

Presumably, this deal would help to right the ship and place the company on better footing moving forward. For Eldorado, it’s another impressive stride for a company that has been growing at an exponential rate. Eldorado may not be as well-known as Caesars at the present time, but that changes in big league fashion if this deal goes through.

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