Reno, Nev.-based Eldorado Resorts last week instantly went
from regional casino player to veritable gaming powerhouse following the
announcement that it had agreed to take over casino-hotel giant Caesars
"It's always unusual when an ostensibly smaller company
pursues a business combination with a larger company," said Brian Egger,
senior analyst for gaming and lodging at Bloomberg Intelligence.
"But while Eldorado is a smaller company and perhaps
not as well known, it has been very acquisitive in recent years," Egger
said. "Most notably, they acquired Isle of Capri Casinos and Tropicana
Entertainment in recent years and, through those deals, have become a
significant participant in the regional casino industry."
Eldorado's blockbuster deal for Caesars is its largest to
date, however, worth approximately $17.3 billion, with that figure inclusive of
$7.2 billion in cash, 77 million Eldorado common shares and the assumption of
Caesars' outstanding net debt. The combined companies will operate under the
Caesars brand and collectively span 60 domestic casino-resorts and gaming
facilities across 16 states, Eldorado said, making it the nation's largest
One of the primary reasons Caesars is so attractive to
Eldorado is its stronghold in Las Vegas, where its portfolio includes Caesars
Palace, Planet Hollywood, Paris Las Vegas, Harrah's Las Vegas, Bally's Las
Vegas, the Linq and the Flamingo Las Vegas. Eldorado is notably absent from the
gaming capital, with 26 properties across Colorado, Florida, Illinois, Indiana,
Iowa, Louisiana, Mississippi, Missouri, New Jersey and Ohio as well as in three
Nevada cities: Reno, Laughlin and Stateline.
Michael Pollock, managing director for Spectrum Gaming
Group, said Las Vegas is one of Caesars' primary attributes for Eldorado, in
addition to its brand-recognition and the strength of the Caesars Rewards
"Eldorado wanted a home on the Las Vegas Strip, and
having a resort or, as in this case, multiple resorts in Las Vegas helps
generate business across other properties," said Pollock. "Effectively,
what it means is that if you're playing at one of their properties in
Pennsylvania, New Jersey or Indiana, you can earn points that can be redeemed
in Las Vegas, and that is extremely attractive from a player's perspective."
Once the Caesars and Eldorado loyalty programs are merged,
Eldorado estimates that the combined platform will have around 65 million
Passing muster with the FTC
However, Alan Woinski, president of the consultancy Gaming
USA Corp., said that the proposed acquisition is likely to face scrutiny when
it undergoes antitrust review with the Federal Trade Commission (FTC) because
of the merged group's dominance in several markets.
"They're not going to pass antitrust approval the way
the companies are set up right now," Woinski said. "I would say
Louisiana and Atlantic City are two markets where they might have to sell one
or two properties, and there are certainly others where it wouldn't surprise me
if more had to be sold, including Las Vegas. The FTC could suddenly say, 'Oh,
we don't like all the concentration you have on the West Coast or in the state
While Eldorado has already announced plans to offload real
estate associated with Caesars Entertainment's Harrah's Resort Atlantic City,
Harrah's Laughlin Hotel & Casino and Harrah's New Orleans Hotel &
Casino to Vici Properties for approximately $1.8 billion, Woinski deemed those
moves relatively minor, with Eldorado likely to have to sell off whole casinos
to pass FTC muster.
In a release announcing the deal with Vici (a real estate investment trust formed in 2017 as a spin-off
from Caesars Entertainment), Eldorado said
that the agreement also grants Vici "right of first refusals for whole
asset sale or sale-leaseback transactions on two Las Vegas Strip properties and
Horseshoe Casino Baltimore," suggesting that the company is mulling which
Vegas resorts to sell.
According to Woinski, having a smaller footprint in Las
Vegas could very likely be a priority for Eldorado.
"They may not want that much exposure on the Strip, and
I wouldn't blame them," Woinski said. "That's an extremely
competitive market, and they may take a close look at some of these Vegas
properties and decide that some, perhaps Flamingo or Bally's, don't fit in with
the rest. And they may also want that couple billion dollars to pay down debt."
Meanwhile, when it comes to turning around the Caesars
business, which has struggled with declining valuations and mounting debt in
recent years, analysts believe that Eldorado is uniquely suited to the
"Eldorado has excelled in recent years in identifying
and executing opportunities for achieving cost efficiencies," said
Bloomberg Intelligence's Egger, who added that after acquiring Isle of Capri
and Tropicana Entertainment, Eldorado targeted opportunities to increase their
overall corporate profit margins.
"And pursuant to [the Caesars] transaction, Eldorado
has targeted $500 million in combined synergies and cost savings, which is an
ambitious number, certainly," Egger said.
Woinski agreed: "This is a lot to bite off for any
company, especially one that several years ago was a tiny little company with a
handful of casinos. But one thing Eldorado has that other companies don't is
this solid track record of buying casinos and casino companies and being able
to squeeze out a lot more Ebitda [earnings before interest, taxes, depreciation
and amortization] than anyone else. When it comes to a Caesars acquisition,
Eldorado really made the most sense."