Long-awaited news of Eldorado Resorts Inc.’s acquisition of Caesars Palace for $8.58-billion is undergoing. Details of the deal reveal that Caesars shareholders will receive $12.75 per share. Eldorado is carving its name in the gambling world with properties all over the US, owning 27 casinos across 12 states.
Eldorado’s ascent to the top of the industry benefited a great deal from a campaign driven by billionaire investor, Carl Icahn, the most influential stakeholder of Caesars. Besides, Caesars was faced with a mountain of debt resulting from coping with the fallout of 2008. These factors leveraged buyout in favour of Eldorado who stepped in perfect timing!
Caesars will retain its name, although it is very obvious from the deal that Eldorado will be managing the business. The deal is revealed during prosperous times for the Gambling Industry with revenues hitting an all-time high of $41.7 billion in 2018. Similarly, Eldorado’s business has grown exponentially in recent years under the management of Tom Reeg, who will also be leading the merge Eldorado-Caesars along with Chairman Gary Carano and the rest of Eldorado’s management.
“Eldorado is 5 for 5 in the merger department, and every time they announce synergies, they find more,”
said Chad Beynon, an analyst at Macquarie.
Eldorado Resorts road ahead
The company has a rough road ahead with rising competition from Northern California and the expansion of gambling licensing across the country. Luckily, Eldorado has a strong foundation, tracing its history back to the development of the Eldorado Hotel in Reno in 1973. They were recognised in 1996 as Eldorado Resorts LLC in connection with a $100-million bond offering. Ever since the company has been overtaking casinos such as the bankrupt Hollywood Casino Shreveport in Louisiana in 2005 as well as Circus Circus Reno in late 2015.
Ever since Eldorado has been buying and selling property while simultaneously developing and expanding their business.
Furthermore, Reeg, who serves as chief executive in the board of directors since 2008
“has built a reputation for cutting costs and boosting profits. He consolidated functions at resorts the company acquired and cut back on the promotions that often lead to vicious competition in small markets”
(Los Angeles Times).
What’s to be expected from the deal?
The deal has a lot of the same players as the Tropicana acquisition and will most likely unfold in the same way. Carl Icahn was also the majority owner of Tropicana, and he was very enthusiastic about the deal. Caesars shareholders were aiming for $15 per share, but given Caesars’ books, those hopes had to be compromised for practical solutions.