Eldorado Resorts announced another property sale, a move some analysts say is a sign that the closing of its acquisition of Caesars Entertainment Corp. is drawing near.
The Reno-based company entered an agreement to sell the Eldorado Resort and Casino in Shreveport, Louisiana, to Nevada-based Maverick Gaming for $230 million in cash. The transaction is subject to a working capital adjustment and regulatory approvals but is expected to close this year, according to a statement from Eldorado.
“The timing of the announcement reaffirms the likelihood of an earlier close, more like March 31 or sooner,” Jefferies gaming analyst David Katz said in a Monday note.
Eldorado has arranged to sell off various properties as it gets ready to take over Caesars. In December, it closed the $385 million sale of three properties in Missouri and West Virginia to Century Casinos and VICI properties. The property plans to sell another Missouri property, Isle of Capri Casino Kansas City, as well as the Lady Luck Casino Vicksburg to Twin River Worldwide Holdings Inc. by early next year.
“The agreement to divest the Eldorado Shreveport is consistent with our continued focus on reducing debt ahead of the expected closing for the Caesars transaction in the first half of 2020,” Eldorado CEO Tom Reeg said in a statement released Monday morning.
Sale widely expected
Reeg told investors in November that he thought the Caesars deal would close in the first quarter. SunTrust Robinson Humphrey analyst Barry Jonas believes it will close around March.
Jonas said in a Monday note that the sale of the Shreveport property had been widely expected, given the Federal Trade Commission’s concerns with Eldorado’s and Caesars’ concentration of properties in Louisiana. Eldorado owns two other properties in the state in addition to its namesake casino, while Caesars owns three Louisiana properties.
Jonas said Eldorado may look to sell in Northern Nevada, another concentrated area, next.
“We would expect to see a related sale (likely Montbleu Lake Tahoe, in our view) in the near-term,” Jonas said in the note.
He said Eldorado may also look to sell a property in Atlantic City, which houses its Tropicana Atlantic City property along with three Caesars properties.
But Deutsche Bank Research analyst Carlo Santarelli said in a Monday note that he doesn’t believe a New Jersey sale will be necessary.
“Given the competitive nature of the (Atlantic City) market and market concentrations relative to history, it is reasonable, at this time, to assume no sale is required,” he said. “Tahoe remains the final FTC related hurdle, and we believe this process remains on track. We would expect this transaction to be very small from both a proceeds and multiple perspective.”
Katz viewed the new transaction as “neutral to modestly positive,” saying he expects another divestiture announcement prior to the close of the Caesars deal. On Monday, Eldorado shares rose 1.52 percent to $59.34, up $0.89.
The Shreveport property is less than a three-hour drive from Dallas and would add about 1,500 slots, 50 table games, 400 hotel rooms and six restaurants to Maverick’s portfolio. The property generates about $110 million in gross gaming revenue annually.
Maverick, which was founded in 2017, has been on a spending spree in recent months. In the last quarter of 2019, the company closed the acquisition of four casino properties — three in Colorado and one in Washington — as well as five card rooms in Washington state. Its newest acquisition will be Maverick’s 27th casino.
“Maverick continues to bet on diversified economies as we expand our gaming portfolio,” said Eric Persson, owner of Maverick Gaming, in a Monday statement. “Maverick’s focus to date has been on the growing, vibrant and dynamic economies of Salt Lake City, Utah, Seattle, Washington and Denver, Colorado. The company now adds Dallas to that list.”
Maverick Gaming owns 26 properties across three states, including the Wendover Nugget and Red Lion Casino in Northern Nevada. The company also owns 19 card rooms in Washington state and three casinos in Colorado.
“We would not be surprised to see Maverick acquire additional properties as larger players look to divest smaller non-core properties and/or FTC mandated sales,” Jonas said in the note.