Nevada gaming regulators approve Eldorado-Caesars $17.3 billion merger

Both the three-member Gaming Control Board and four-person Nevada Gaming Commission unanimously approved the merger during more than four hours of a public hearing in which the participants appeared at the Grant Sawyer Building in Las Vegas. The transaction will create a regional gaming giant that operates nearly 60 gaming properties in 16 states.

Until Wednesday, Nevada had been one of three states that had yet to sign off on the merger, in which Reno-based Eldorado is the acquiring company. Eldorado’s management will control the merged operation, with CEO Tom Reeg overseeing the combined company that will retain the Caesars’ name.

Gaming regulators also approved sports betting operator William Hill US request to take over the all the Caesars-operates sportsbooks in Nevada, including Caesars Palace and Harrah’s Las Vegas. Eldorado has a partnership agreement with the American subsidiary of UK-based sports betting giant William Hill. In 2019, Eldorado gained a 20% ownership stake in the business in exchange for a 25-year deal to operate sports betting in the company’s casinos where the activity is legal.

In approving the deal, Control Board Chairwoman Sandra Douglass Morgan said the transaction not only creates the nation’s largest domestic gaming company but also provides “new Caesars” with an opportunity to “be a leader in the state.”
Morgan said she “hopes to hear updates on both investment in Nevada properties and employees.”

Current Caesars board member Jan Jones Blackhurst, who will join the combined company’s new board, will chair a new board committee overseeing social responsibility and diversity. The position was announced at the hearing by Eldorado Chairman Gary Carano.

Eldorado currently does not own a casino in Las Vegas but will acquire eight Strip properties – Caesars Palace, Harrah’s Las Vegas, Flamingo Las Vegas, Bally’s Las Vegas, Paris Las Vegas, Planet Hollywood, Cromwell and Linq Resort – as part of the transaction. Last year, Caesars sold the Rio in Las Vegas to a New York investment and will operate the property at least through the end of the year.

Eldorado Chief Financial Officer Bret Yunker said the company would “divest a strip asset in the first 12 to 24 months” after the transaction closes.”

In Lake Tahoe, Eldorado is selling the operations of MontBleu Resort Casino to Twin River and will retain ownership of the Caesars-operated Harrah’s and Harvey’s in the picturesque community at the state line with California. Twin River is also buying Eldorado Shreveport as part of the MontBleu deal for a combined $155 million.

The Federal Trade Commission conditionally signed off on the merger on June 26 pending the sale of the two casinos which would clear up antitrust issues.

In Reno, Eldorado operates the three properties – Eldorado, Silver Legacy, and Circus Circus – which are collectively referred to as “The Row.” Caesars sold Harrah’s Reno in January to a real estate developer who planned to convert the site into a mixed-use non-gaming project. The aging downtown casino was closed in March as part of the statewide gaming shut down due to the coronavirus pandemic and the developers last month said the resort would not reopen.

After the merger closes, Eldorado will own two resorts in Laughlin, Nevada – Tropicana Laughlin and Harrah’s Laughlin.

Under the terms of the merger agreement, which was announced on June 24, 2019, Eldorado will pay $8.40 per share in cash and 0.0899 shares of Eldorado stock for each Caesars share, or $12.75 per share. The combined business will be called Caesars, and its shares will be traded on the Nasdaq.
Eldorado had nearly $3 billion in debt on its books at the end of March. That figure will jump to almost $13 billion once the companies are merged.

However, the roughly $12 billion in long-term lease payments Eldorado will owe to real estate investment trusts Gaming and Leisure Properties and VICI Properties company increases the company’s total debt load to some $25 billion. Analysts said the investment community and common accounting principles count leases as debt.

“This is a sizeable transaction here and my concern is the elephant in the room, which is the amount of debt,” said Gaming Control Board Member Terry Johnson. He said the company “satisfied his concerns.