Wed, Jun 26, 2:13pm by Staff Writer
In the casino business, it’s the minnow swallowing the whale.
Japan Times is reporting that Eldorado Resorts Inc’s $8.58 billion acquisition of Caesars Entertainment Corp means an underdog from Reno, Nevada – a town long in the shadow of Las Vegas – will become the largest owner of casinos in the US.
In the deal announced Monday, Caesars shareholders will receive about $12.75 a share, including $8.40 in cash.
That’s a 28 per cent premium to the casino chain’s close on Friday.
While the combined company will retain the Caesars name, there’s no mistaking who’s buying whom in this transaction: Eldorado, with a market value of less than $4 billion, is clinching the giant from Las Vegas and its flagship Caesars Palace.
Eldorado’s quick ascent to the top of the industry benefited from a campaign by activist billionaire Carl Icahn, Caesars’ biggest shareholder, who pushed for a sale in recent months.
The Reno company is buying an ailing Caesars, still coping with the fallout of a 2008 leveraged buyout that left it with a mountain of debt.
But it wasn’t the only suitor: Golden Nugget owner Tilman Fertitta proposed merging his restaurant and casino empire with Caesars last year.
Eldorado dates back to a single casino opened in Reno in 1973 by Donald Carano, a lawyer who died in 2017.
The town, which calls itself “The Biggest Little City in the World” has always been the second fiddle of Nevada’s gambling industry.
The business has grown exponentially in recent years under the direction of Tom Reeg, who is now chief executive officer and will lead the combined Eldorado-Caesars along with Chairman Gary Carano and the rest of Eldorado’s management.
Among its purchases, Eldorado acquired MTR Gaming Group and Isle of Capri Casinos, and last year added Tropicana Entertainment, which was controlled by Icahn.
— CTV News (@CTVNews) June 24, 2019
Earlier this year, there were reports that billionaire Carl Icahn is more eager to sell casino chain Caesars Entertainment than the company’s board, The New York Post has learned.
The octogenarian investor thinks the board of America’s biggest gaming company is demanding too much for the $6.2 billion company in its ongoing merger talks with rival casino operator Eldorado, insiders allege.
The owner of Bally’s and Harrah’s kicked of its auction two months ago with a price of $13 a share.
As The Post exclusively reported on June 6, Eldorado countered with a bid of $10.50 a share, which the board unanimously rejected as too low.
Icahn owns a 28.5 per cent stake in Caesars with swaps, has agreed that Eldorado’s $10.50, which represented a measly 15 per cent premium over the stock, was unacceptable.
But he is also willing to accept less than the board is now seeking, sources said.
Reeg will have his work cut out for him with Caesars, which is competing with newer resorts in places like Atlantic City, New Jersey
Apollo Global Management LLC and TPG, the two private equity giants in the 2008 leverage buyout of Caesars, took a bath on the company before exiting the investment several months ago. Their departure allowed Icahn to swoop in.
Caesars casinos are likely to contend with even steeper competition in states such as Illinois, which recently authorised six new casinos – including one in downtown Chicago.
Eldorado and Caesars said Monday that they have identified benefits of $500 million by combining the businesses, 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.
“As with our past transactions, we have a detailed plan for significant synergy realisation,” Reeg said in a statement.
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