(Bloomberg) – Eldorado Resorts Inc. completed its $ 17 billion acquisition of Caesars Entertainment Corp., going through a series of obstacles, including the global pandemic, to create a new power in the casino industry.
The merger, first announced in June last year, culminated a series of deals for the once-small casino company. But the transaction faced obstacles, including several states where the new company’s market share exceeded regulators’ wishes, and the coronavirus, which closed casinos in the US for nearly three months this year.
Eldorado, led by CEO Tom Reeg, had to struggle to find buyers for some of the company’s properties. It raised up to $ 772 million in a new share offering, negotiated new loan terms with banks, and sold $ 6.2 billion in junk bonds to make the deal. On July 10, regulators in Indiana approved the merger on condition that the company sell three of its five properties in the state. New Jersey gave the green light last week.
The new company, which will use the Caesars name, is now the largest casino operator in the United States, with some 55 properties. Reeg, a former bond fund analyst and manager, is known for squeezing profits out of even modest properties. The new company is expected to focus on the fast-growing business of sports betting, while reducing incentives for customers that have historically affected casino profits.
Goodbye to buffets
Reeg said in a hearing in Nevada on July 8 that properties outside of Las Vegas would probably never offer buffets again. They cost the company $ 3 million each, per year, and were often given away to attract players.
“If you didn’t give me the free food, it would show up anyway,” he said of his clients.
A major challenge: While the smaller markets where Eldorado has traditionally done business have recovered faster since it reopened, Las Vegas’ top tourist destination has taken longer to recover. Reeg told Nevada regulators that he expects a rebound there in the fourth quarter.
Eldorado shares fell 2.2% to $ 37.16 in New York. Before Monday, the stock was down 36% this year.
Under its previous owners, Caesars struggled with its finances. A leveraged purchase of $ 30 billion in 2008 left the company in debt. Years of restructuring followed, as did the bankruptcy of its largest division.
Investor Carl Icahn took control of Caesars last year and negotiated the sale to Eldorado. That Reno, Nevada-based company had been a small player a few years ago, controlled by the founding Carano family. Now, his empire includes tent properties like Caesars Palace and Paris in Las Vegas, as well as Harrah’s in New Orleans.
However, the new company will have a total debt of around $ 14 billion, at a time when consumer discretionary spending is uncertain.
For more items like this, visit us at bloomberg.com
Subscribe now to stay ahead with the most trusted source of business news.
© 2020 Bloomberg LP
