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Eldorado, Caesars close steep ‘haircut’ deals to keep merger on track

Updated April 24, 2020 - 6:17 pm

Eldorado Resorts Inc. and Caesars Entertainment Corp. divested three casinos at breathtakingly low prices Friday, clearing a path toward their merger by the end of June.

The deals, all with Lincoln, Rhode Island-based Twin River Worldwide Holdings Inc., were announced separately by the two companies.

In one announcement, Reno-based Eldorado said it would sell the Eldorado Shreveport Resort and Casino in Shreveport, Louisiana, and the MontBleu Resort Casino & Spa in Lake Tahoe to Twin River for $155 million in cash.

Eldorado had a previous deal planned with Las Vegas-based Maverick Gaming that was canceled and the deposit returned. Maverick had offered $230 million for the Shreveport property and an undisclosed amount for MontBleu.

“The agreement to divest Shreveport and MontBleu to Twin River Worldwide Holdings is consistent with our continued focus on closing the Caesars transaction in the first half of 2020,” Eldorado CEO Tom Reeg said in a statement.

Eric Persson, the owner of Maverick Gaming, said his company was in a position to complete the deal having worked closely with lenders.

“At this time it is more important for Maverick to nurture and protect its existing assets than it is to expand our asset base,” Persson said in a statement. “They (Eldorado Shreveport and MontBleu) are great assets, and in a normal environment, we would be very excited to own them.”

Bally’s Atlantic City

In a separate transaction, Las Vegas-based Caesars agreed to sell its Bally’s Atlantic City property to Twin River, a publicly traded gaming company that owns casinos and racetracks in Colorado, Delaware, Mississippi and Rhode Island.

In a Securities and Exchange Commission filing Friday, Caesars said it would sell Bally’s Atlantic City and its real estate for $25 million in cash.

Carlo Santarelli, a gaming industry analyst in the New York office of Deutsche Bank described the price point as a “financial haircut.”

Under terms of the deal, Vici Properties Inc., Caesars’ affiliated real- estate investment trust, would receive $19 million from the sale, and Caesars would get $6 million.

Following the sale, Caesars would continue to operate Caesars Atlantic City, which will include the Wild Wild West casino area and The Book sports wagering facility, and Harrah’s Resort Atlantic City. Vici will continue to own the land and real estate associated with Caesars Atlantic City, including the Wild Wild West casino area.

Easing concerns

Both deals are expected to ease antitrust concerns that could have come from the Federal Trade Commission. The FTC, the Nevada Gaming Commission and other regulators need to sign off on the $17.3 billion Eldorado-Caesars merger before the deal can close.

Santarelli said Eldorado’s decision to move from Maverick Gaming to Twin River was likely based on concerns that Maverick would not be able to close the deal.

“We believe this removes a key concern related to the potential re-emergence of FTC issues, in the event Maverick was unable to close on the transactions,” Santarelli said in a Friday note to investors.

“We think this transaction, given the financing circumstances of Twin River, despite the financial haircut, is a distinct positive for Eldorado as it pertains to getting to the finish line with the Caesars acquisition,” Santarelli said. “We expect the acquisition of Caesars to close late in the second quarter of 2020.”

Santarelli said that on March 20, Twin River announced that it had $360 million of available cash and no debt maturities until 2024, providing about 12 months of liquidity in a zero-revenue environment. Twin River announced that it expected to fund the aggregate $180 million capital outlay with cash on hand, and proceeds from an expected upsizing of an existing credit facility.

All three company stocks enjoyed double-digit percentage increases in Friday trading with heavy volume.

Eldorado was up $2.32, nearly 15 percent, to close at $17.90 per share. Caesars gained 93 cents, more than 10 percent, closing at $8.99 a share. Twin River was up $2.43, more than 20 percent, to close at $14 a share.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.

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