Louisiana Gaming Regulator Gives The Go-Ahead To Eldorado-Caesars Merger

After the approval of the regulatory body in Missouri in December 2019, now the merger between Eldorado Resorts, Inc. and Caesars Entertainment has been given the green light from the Louisiana Gaming Control Board.

Initially announced in June 2019, the $17.3 billion cash-and-stock deal is about to create one of the largest casino operators in the US, with 60 casinos in total and a combined market capitalization of almost $11 billion, and would give the relatively small operator Eldorado Resorts a long-coveted presence in the Las Vegas Strip, hopefully by the end of the first half in 2020, subject to further regulatory approvals from all the states the two companies operate.

Shifts in properties within the gambling industry

Gaining access to Caesars’ brands such as Harrah’s, Horseshoe, Bally’s and Harveys does not come cheap to the Reno-based gaming and hospitality operator, with the reported price of $12.75 per share they agreed to pay to Caesars’ shareholders containing almost 30% premium, plus the $8.8 billion in Caesars’ liabilities, and one way to for Eldorado to acquire the necessary cash is through property sales.

Even before the shareholders of both companies voted for the deal, a streamlining of the properties of the two companies in areas where there is an overlap took place, with Eldorado Resorts selling two casinos in Missouri and one in West Virginia, in a combined $385 million transaction with Century Casinos and VICI Properties, the latter also being part of a $3.2 billion side deal in the merger, along the lines of which the property company will acquire Harrah’s Resort Atlantic City, Harrah’s Laughlin Hotel & Casino, and Harrah’s New Orleans Hotel & Casino for about $1.8 billion and would then lease them back to the newly formed casino and hospitality giant.

After the sale of Rio All-Suite Hotel & Casino for $516.3m, Caesars announced that there is no further interest in the Japanese IR project, but will continue work on its Korean integrated resort.

Cost-cutting and more property sales

The combined company ownership will be split 51 to 49 in favour of Eldorado and the Reno-based casino operator management will take the reign of the newly formed company, and their first actions are going to be cost cutting of employment costs, with synergy for the first year estimated at $500 million.

Recently Eldorado announced the sale of its Casino & Hotel in Shreveport, LA for $230 million, but a deal of this magnitude will require more sales, probably in the markets of Lake Tahoe, Laughlin, Reno and Louisiana, where both companies have a geographic overlap.

Whether Eldorado will have to sell a Las Vegas Strip property, in line with the recent trend in the industry, remains to be seen.