International edition
June 20, 2019

Despite versions of a takeover offer rejected as too low

Caesars and Eldorado Resorts in advanced merger talks

Caesars and Eldorado Resorts in advanced merger talks
A key hurdle is Caesars’ USD 18.5 billion of net debt. Eldorado, which closed up 1% to USD 49.78, carries a USD 3.8 billion market cap and a more manageable USD 3.5 billion in net debt.
United States | 06/07/2019

After failed merger negotiations with William Hill disclosure, Caesars could be valued at more than USD 7.4 billion in this transaction. A deal could still be weeks away and may fall apart if financing can't be lined up, according to prestigious US newspapers. Both companies' shares jumped on the news.

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aesars Entertainment Corp., pushed by activist billionaire Carl Icahn to consider a sale, is in advanced discussions about merging with casino rival Eldorado Resorts Inc., according to a person familiar with the situation cited by the Wall Street Journal and Bloomberg.

Caesars could fetch more than $11 a share in the transaction, said the same source, who asked not to be identified because the discussions are private. That would value the company at more than $7.4 billion. A deal could still be weeks away and may fall apart if financing can’t be lined up, according to these publications.

Caesars shares were up as much as 7.1% to $9.78 in premarket trading Friday. Eldorado, which had a market value of $3.9 billion at the close Thursday in New York, gained 2.5% to $51 in late trading Thursday and was inactive early Friday. The talks were initially reported Thursday by the Wall Street Journal.

Caesars has rejected a takeover offer from Eldorado Resorts as too low — although continued negotiations could soon lead to a higher offer, The New York Post reported. Sources cited by the newspaper said that both Caesars and Icahn, who has a 28.5% stake in Caesars with swaps, agreed to reject the Eldorado bid. Since killing that proposal, the two sides have been working on a new offer that could be announced as soon as next week, people with direct knowledge of the talks said.

Helping Eldorado is the fact that no other bidders stepped up to the table. Golden Nugget casinos, owned by Houston Rockets owner Tilman Fertitta, had been circling a merger with the owner of Bally’s and Harrahs, but never submitted a viable offer. Also working in Eldorado’s favor is Chief Executive Tom Reeg, who has worked with Icahn before.

A key hurdle is Caesars’ $18.5 billion of net debt. Eldorado, which closed up 1% to $49.78, carries a $3.8 billion market cap and a more manageable $3.5 billion in net debt.

Earlier this week, The Sunday Times revealed that William Hill held talks with Caesars last year about a potential £6 billion (USD 7.57 B) merger. The negotiations attempted to discuss a cash-and-shares deal but ultimately failed over a disagreement on price, leading Caesars to switch its attentions to Eldorado Resorts. As Eldorado owns nearly a fifth of William Hill’s American business, this sparked speculation that a future relationship between Caesars and the British company is not out of the question.

Caesars, whose properties include the flagship Caesars Palace and the Harrah’s chain, is still coping with the fallout of a 2008 leveraged buyout led by Apollo Global Management and TPG that left it with a mountain of debt. The company completed a bankruptcy of its largest unit two years ago that brought in new board members and shareholders, including distressed-debt investors. Apollo and TPG have sold their shares.

Caesars named casino-industry veteran Anthony Rodio as its chief executive officer in April. Icahn reached an agreement with Caesars this year that granted three seats on the board. Additionally, Caesars hired advisers to weigh expressions of interest to acquire the Las Vegas-based company.

Eldorado, which dates back to a single casino opened in Reno, Nevada, in 1973, has grown exponentially in recent years under the direction of Tom Reeg. The company in recent years acquired MTR Gaming Group and Isle of Capri Casinos, and last year added Tropicana Entertainment, which was controlled by Icahn. The business, which still counts the founding Carano family as its largest shareholder, now has 26 casinos in 12 states.

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