After rumors of a deal swirled, Eldorado Resorts, Inc. and Caesars Entertainment Corporation announced on Monday that they have agreed to a merger, forming the largest gambling company in the United States. The combined company will operate close to 60 casino-resorts in 16 states, including the Rio All-Suites Hotel and Casino, home of the World Series of Poker.
Eldorado’s Chief Executive Officer, Tom Reeg, said of the marraige in a press release:
Eldorado’s combination with Caesars will create the largest owner and operator of U.S. gaming assets and is a strategically, financially and operationally compelling opportunity that brings immediate and long-term value to stakeholders of both companies. Together, we will have an extremely powerful suite of iconic gaming and entertainment brands, as well as valuable strategic alliances with industry leaders in sports betting and online gaming. The combined entity will serve customers in essentially every major U.S. gaming market and will marry best-of-breed practices from both entities to ensure high levels of customer satisfaction and significant shareholder returns.
Let’s get into some of the financial nitty-gritty. Eldorado will actually buy all of the outstanding shares of Caesars (that is, all of the shares that exist) for $12.75 per share, which is a combination of $8.40 in cash and .0899 shares of Eldorado stock for each share of Caesars stock. The total value is estimated to be about $17.3 billion.
Eldorado shareholders will own 51 percent of the company, but the name of the new company will be Caesars because of its brand value.
There is a second part of this transaction, as well. Eldorado will sell Harrah’s Resort Atlantic City, Harrah’s Laughlin Hotel & Casino, and Harrah’s New Orleans Hotel & Casino to VICI Properties for $1.8 billion. VICI will then lease out these properties. It is not completely clear in the announcement, but seems like Caesars will be the lessee, operating the casinos as normal. VICI has done this leaseback process with other gaming firms in the past.
“VICI is honored and excited to be integrally involved with Eldorado in this transformative transaction,” said VICI CEO Ed Pitoniak. “As a REIT, we seek to partner with operators who have the most powerful, valuable and enduring relationships with the end users of our real estate. Under Tom Reeg’s leadership and front-line focus, the combination of Eldorado and Caesars will yield the most compelling guest experiences and network effect in American gaming.”
Caesars CEO Tony Rodio added:
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.
The deal has already been unanimously approved by the boards of all three companies and is expected to be finalized in the first half of next year.
