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Eldorado Resorts to Acquire Caesars Entertainment for $17.3B, Creating World’s Largest Gaming Company

As an extension of the transaction, Eldorado Resorts has given VICI Properties the first right of refusal to purchase Bally's Las Vegas. (Photo courtesy of Caesars Entertainment Corp.)

RENO AND LAS VEGAS, NEV. — Eldorado Resorts Inc. (NASDAQ: ERI) and Caesars Entertainment Corp. (NASDAQ: CZR) have agreed to merge operations in a cash and stock deal valued at $17.3 billion. Eldorado plans to purchase the assets and operations of Caesars, creating the world’s largest gaming company.

If approved and executed, the combined company would operate under the Caesars name and continue to trade on the Nasdaq Global Select Market. The combined company would own and operate approximately 60 casino-resorts and gaming facilities across 16 states.

The combined company will also oversee the completion of the $1.2 billion room remodeling program of Caesars’ Las Vegas Strip assets.

Eldorado will acquire all the outstanding shares of Caesars using $7.2 billion in cash, approximately 77 million Eldorado common shares and the assumption of Caesars outstanding net debt, excluding face value of the existing convertible note (i.e. short-term debt that converts to equity).

Eldorado and Caesars shareholders will hold approximately 51 percent and 49 percent of the combined company’s outstanding shares, respectively.

The combined company’s board of directors will consist of 11 members, six from Eldorado’s board of directors and five from Caesars’ board of directors. The board of directors for both companies have approved the transaction, which is expected to be completed in the first half of 2020.

The transaction is subject to approval of the stockholders of Eldorado and Caesars, the approval of applicable gaming authorities, the expiration of the applicable Hart-Scott-Rodino Antitrust Act waiting period and other customary closing conditions.

VICI gets in on the action
Eldorado Resorts is selling three assets to VICI Properties (NYSE: VICI) in a deal valued at $3.2 billion. Per the terms of the agreement, VICI will acquire the land and real estate assets associated with Harrah’s New Orleans, Harrah’s Laughlin and Harrah’s Atlantic City. VICI will also modify certain provisions of the existing Caesars lease agreements, extending each lease by another 15 years prior to the completion of the initial lease term.

The two companies have also entered into a “put-call agreement,” whereby VICI has a call right to acquire the land and real estate associated with Harrah’s Hoosier Park and Indiana Grand at a 7.7 percent cap rate. Eldorado has a put option that would require VICI to purchase the same assets at an 8 percent cap rate. The put-call agreement may be exercised by either party between Jan. 1, 2022 and Dec. 31, 2024.

Additionally, VICI will have first right of refusal for whole asset sale or sale-leaseback transactions on two Las Vegas Strip properties. The first property will be selected among the following four: Flamingo Las Vegas, Bally’s Las Vegas, Paris Las Vegas and Planet Hollywood Resort & Casino. The second property is one of the previous four plus the LINQ Hotel & Casino. Eldorado will also give VICI the right of first refusal for a sale-leaseback transaction on Horseshoe Casino Baltimore.

The board of directors for both Eldorado and VICI have approved the transaction, which is subject to the closing of the Eldorado-Caesars merger.

About the companies
Reno-based Eldorado Resorts is a casino entertainment company that owns and operates 26 properties in 12 states, including Colorado, Florida, Illinois, Indiana, Iowa, Louisiana, Mississippi, Missouri, Nevada, New Jersey and Ohio. In aggregate, Eldorado’s properties feature approximately 23,000 slot machines and video lottery terminals (VLTs), 650 table game and more than 12,000 hotel rooms.

J.P. Morgan, Credit Suisse and Macquarie Capital are serving as financial advisors to Eldorado. Milbank LLP and Latham & Watkins LLP are serving as Eldorado’s legal counsel.

Eldorado’s stock price closed on Monday, June 24 at $45.55 per share, up from $41.40 a year ago.

Las Vegas-based Caesars currently owns and operates 34 casinos and resorts in Kentucky, Illinois, Indiana, Iowa, Louisiana, Mississippi, Missouri, Nevada and New Jersey. Domestically, Caesars properties feature approximately 48,000 slot machines and VLTs, 3,000 table games and more than 39,000 hotel rooms. The company’s resorts operate primarily under the Harrah’s, Caesars and Horseshoe brand names. Caesars also owns the London Clubs International family of casinos.

Caesars Entertainment’s resorts operate primarily under the Harrah’s, Caesars and Horseshoe brand names. (Photo courtesy of Caesars Entertainment)

PJT Partners LP is serving as financial advisor to Caesars. Skadden, Arps, Slate, Meagher & Flom LLP is serving as Caesars’ legal counsel.

Caesars Entertainment’s stock price closed on Monday, June 24 at $11.55 per share, up from $10.80 a year ago.

VICI Properties is an experiential REIT that owns one of the largest portfolios of gaming, hospitality and entertainment destinations, including Caesars Palace. VICI’s portfolio consists of 23 gaming facilities comprising over 40 million square feet and features approximately 15,200 hotel rooms and more than 150 restaurants, bars and nightclubs. Its properties are leased to the top gaming and hospitality operators, including Caesars and Penn National Gaming Inc. VICI also owns four championship golf courses and 34 acres of undeveloped land adjacent to the Las Vegas Strip.

Deutsche Bank Securities Inc. is acting as financial advisor to VICI Properties, Stifel provided a fairness opinion and Kramer Levin Naftalis & Frankel LLP and Hogan Lovells US LLP are acting as legal advisors. VICI Properties has obtained committed financing, subject to customary conditions, from Deutsche Bank AG.

VICI’s stock price closed on Monday, June 24 at $22.32 per share, up from $20.84 a year ago.

— John Nelson

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