Hotel-casinos on the Las Vegas Strip don’t go up for sale often.
“That alone makes them pretty desirable,” said Union Gaming analyst John DeCree.
“I would expect that we would be a seller of a Strip asset, but that decision has not been made,” said Eldorado CEO Thomas Reeg in a June 24 conference call about the acquisition, slated to close in 2020.
Tilman Fertitta — owner of restaurant giant Landry’s Inc and Golden Nugget Casinos — and Phil Ruffin, owner of TI, have already expressed interest in buying a Caesars property.
Other potential buyers have been mum, but analysts say there are a handful that would benefit from scooping up a Strip casino.
DeCree said it’s difficult to say which Strip properties the merged company would consider selling if the deal closes in 2020 as planned, but he anticipates at least one to be up for the taking, maybe two.
DeCree said this could be a huge opportunity for gaming companies that don’t yet have a presence on the Strip. While construction costs for a new Strip property can rack up to billions of dollars — the under-construction Resorts World has an estimated cost of $4 billion — buying a completed property costs far less, and can start returning cash flow immediately.
Barry Jonas, an analyst at SunTrust Robinson Humphrey, said there’s a “whole host” of companies that could be interested in acquiring a Caesars Strip property.
He gave examples of local companies like Penn National Gaming and Boyd Gaming Corp., along with smaller casino companies like Rhode Island-based Twin River Worldwide Holdings Inc. and Reno-based Monarch Casino.
Spokesmen for Penn and Boyd declined to comment.
Representatives for Twin River and Monarch did not respond to requests for comment.
“Both (Twin River and Monarch) are examples of smart operators who don’t have a Strip presence,” Jonas said. But there are plenty of other companies that could show interest, he added.
While anything is possible, DeCree said he doesn’t see Boyd or Penn throwing their hats into the ring. Boyd has already tried its luck at owning a Strip property. In 2013, it sold its Echelon project to Genting Group, which is now developing Resorts World in its place. And Penn acquired Pinnacle Entertainment for $2.8 billion just last year.
Additionally, DeCree said “you’re looking at peak prices right now in Las Vegas at this point in the economic cycle.”
DeCree had Fertitta and Ruffin at the top of his list of likely buyers. Fertitta expressed interest in a merger with Caesars last year.
A Strip property “fits right into (Fertitta’s) ability and know-how and strategy,” DeCree said. “There’s competitiveness in other markets. Fertitta could fit right into the Strip.”
Jonas also believes a Strip property would make a great fit in Landry’s portfolio.
“We could see them going for anything with Caesars that Eldorado is looking to divest that has been given less attention,” he said.
Spokespeople for Fertitta declined to comment.
As for Ruffin, spokeswoman Michelle Knoll said he is “still interested in Caesars’ properties” but is not willing to speak to specifics at this time.
“He has a lot of success with Treasure Island,” DeCree said. “There could be a lot of opportunities for Ruffin to buy one or two properties on the Strip.”
DeCree said the merged company may also look to sell smaller properties outside of Las Vegas to clean up its portfolio. It wouldn’t be a stretch for Eldorado, which sold three of its smaller regional properties last month.
Additionally, the company may have to look at divesting some of its properties to comply with Federal Trade Commission laws.
“You could see divestments in the Reno-Tahoe market, in Louisiana, Atlantic City potentially,” Jonas said. “It’s unclear which of those properties would go.”
As for properties in Missouri, Jonas said Eldorado’s recent sale of its Isle Casino Cape Girardeau and Lady Luck Casino Caruthersville properties mitigates risk of FTC non-compliance. Now, Caesars would have four properties in the state instead of six following the acquisition.
Overall, DeCree said only time will tell which properties are up for grabs.
“We’ll let the FTC tell us where they might have too much exposure,” he said. “It’s not, in our view, going to be an impediment or roadblock to getting the deal closed.”
Caesars’ Strip assets:
• Caesars Palace (includes the Nobu Hotel)
• The Cromwell
• The Linq Hotel
• Paris Las Vegas
• Planet Hollywood Resort
Impact on jobs?
Labor unions have expressed concerns about how Eldorado’s acquisition of Caesars would impact employees.
“Where are they going to cut?,” asked D. Taylor, the president of hospitality workers union UNITE HERE, in a June 25 statement. “We will not stand by idly if the proposed Caesars-Eldorado transaction will lead to significant job losses, worse wages and benefits for our members, and lower state gaming tax receipts in the many communities where members we represent work and live.”
Jonas said it’s too early to tell, but he expects that if layoffs were to occur, they would initially focus on corporate-level positions.
“Eldorado has been clear that they have significant expectations around driving synergy,” he said. “It’s about being a lot more efficient.”