International edition
August 21, 2019

Including debt, the deal is worth approximately USD 17.3 billion

Eldorado buys Caesars for nearly USD 8.6 billion

Eldorado buys Caesars for nearly USD 8.6 billion
The combined company’s ownership would be split roughly between Eldorado and Caesars shareholders.
United States | 06/24/2019

It creates a company with 60 own casino resorts across 16 states. The agreed equity value amounts to USD 12.75 a share, and both firms have identified benefits of USD 500 million. This follows Caesars biggest shareholder Carl Icahn's push for a sale, and the advanced merger talks disclosed earlier this month. The company will continue to operate under the Caesars name.

U

S casino operator Eldorado Resorts Inc. has agreed to merge with Caesars Entertainment Corp. for about $8.58 billion in a cash and stock deal backed by activist billionaire Carl Icahn that will create the largest US gaming operator, the companies said in a statement.

The agreed equity value of $12.75 a share -- in a mix of cash and Eldorado stock -- represents a premium of about 28% to Caesars’s Friday closing price. Including debt, the deal is worth approximately $17.3 billion.

The combined company’s ownership would be split roughly between Eldorado and Caesars shareholders, Reuters reported. Caesars shares rose 13% to $11.25 in pre-market trading in New York, and Eldorado dropped 6.8%.

Casino and hotel operator Caesars had been pushed to consider a sale by Icahn, its biggest shareholder, and earlier discussions had focused on a deal that would have valued Caesars at $11 a share, a person familiar with those talks had said, according to Bloomberg.

The agreement comes three months after Reuters reported that Caesars had agreed to give Eldorado access to its books under pressure from Icahn, who earlier this year was awarded seats on Caesars’ board.

Caesars, whose properties include the flagship Caesars Palace and the Harrah’s chain, and had 53 properties in 14 US states and five other countries at the end of December, is still coping with the fallout of a 2008 leveraged buyout led by Apollo Global Management LLC and TPG that left it with a high debt level. 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.

Eldorado and Caesars said they have identified benefits of $500 million by creating a company with 60 owned, operated and managed casino–resorts across 16 states, and expect the deal to boost cash flow immediately. A parallel agreement will see VICI Properties Inc. acquire some of the companies’ real estate, generating $3.2 billion of proceeds to help pay down debt.

Eldorado’s management team will lead the new company, which will continue to operate under the Caesars name and to trade on the Nasdaq Global Select Market.

“We intend to allocate the significant free cash flow from the combined company to reduce leverage while investing to improve the customer experience across the platform,” said Eldorado’s Chief Executive Officer Tom Reeg.

Before Monday, Eldorado shares had risen 17% in the past year, compared with a 12% decline in Caesars’ stock. The S&P Supercomposite Casinos & Gaming Index, which tracks the performance of nine stocks including the two companies, slumped about 20%.

“While I criticized the Caesars Board when I took a major position several months ago, I would now like to do something that I rarely do, which is to praise a board of directors for acting responsibly and decisively in negotiating and approving this transformational transaction,'' Icahn said in a statement.

Tony Rodio, Chief Executive Officer of Caesars, commented: “We believe this combination will build on the accomplishments and best-in-class operating practices of both companies. I’m familiar with Eldorado and its management team, having worked with them on a previous transaction, and I look forward to collaborating with them to bring our companies together. We are excited to integrate Caesars Rewards with the combined portfolio. The incorporation of Caesars Rewards has produced strong results at the recently acquired Centaur properties. By joining forces, we believe the new Caesars will be well-positioned to compete in our dynamic industry.”

Eldorado, which had a market value of about $4 billion as of Friday, and had long-term debt at the end of March of $3.1 billion, wasn’t Caesars’ only suitor. Golden Nugget owner Tilman Fertitta proposed merging his restaurant and casino empire with Caesars last year, but was rejected by Caesars.

Eldorado dates back to a single casino opened in Reno, Nevada, in 1973, and it has grown exponentially in recent years under the direction of Tom Reeg, who is now chief executive officer. The company in recent years acquired MTR Gaming Group Inc. and Isle of Capri Casinos, and last year added Tropicana Entertainment Inc., 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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