High rollers: Eldorado buys Caesars in deal valued at $17B

A man took pictures of Caesars Palace hotel and casino in Las Vegas in January 2015. Eldorado Resorts Inc. will buy Caesars Entertainment Corp. in a cash-and-stock deal valued at $17.3 billion.

A casino juggernaut was formed Monday when Eldorado Resorts Inc. announced it was buying Caesars Entertainment Corp. in a cash-and-stock deal valued at $17.3 billion.

The acquisition will put about 60 casino resorts in 16 states under a single name, Caesars, creating the largest gambling operator in the United States. The deal — following pressure from activist investor Carl Icahn — is targeted to close in the first half of 2020 if approved by gambling regulators and shareholders.

It would open the doors of the Las Vegas Strip market to Eldorado.

“We are incredibly excited. This is an iconic brand,” Eldorado CEO Tom Reeg said, referring to Caesars Entertainment, during a conference call. “It’s really a level of property and brand that we have not had the great fortune to control, and now we will.”

Eldorado will pay $8.40 per share in cash and 0.0899 shares of Eldorado stock for each Caesars share, or $12.75 per share. The transaction values Caesars at about $8.6 billion, and Eldorado will pick up about $8.8 billion of the company’s debt.

Shareholders of Eldorado Resorts will hold about 51% of the company’s outstanding stock, with Caesars Entertainment shareholders holding the remainder.

The company will be led by Reeg, along with Eldorado Chairman Gary Carano. It will be based in Reno, Nev., where Eldorado is based, and have a significant corporate presence in Las Vegas, where Caesars is based.

The deal was months in the making. Icahn earlier this year revealed he had amassed an enormous stake in Caesars Entertainment and pushed for fundamental changes at the company, including board representation and a say in the replacement of the CEO at the time. He argued that the company’s stock was undervalued and the best way to boost it would be to sell it.

Caesars Entertainment, which operates more than 30 casinos in the U.S., emerged from bankruptcy protection in late 2017, but it’s been struggling since.

In April, Icahn appointed Caesars Entertainment’s current CEO, Tony Rodio, who had the same role at the billionaire’s Tropicana Entertainment, which was sold to Eldorado in 2018. He also got to pick board members.

“While I criticized the Caesars Board when I took a major position several months ago, I would now like to do something that I rarely do, which is to praise a board of directors for acting responsibly and decisively in negotiating and approving this transformational transaction,” Icahn said in a prepared statement Monday. “As a combined company, Caesars and Eldorado will be America’s preeminent gaming company.”

The bankruptcy reorganization led to the creation of the real estate investment trust VICI Properties Inc. It owns the buildings and land of more than 20 casino resorts, including Caesars Palace on the Las Vegas Strip, and leases the operations back to casino operators.

Reeg told analysts and investors the company expects to sell some properties that may allow it to avoid federal antitrust issues. It is also evaluating whether to sell properties on the Strip.

“As I sit here today, I tell you, I think that there’s more Strip exposure than we would need to accomplish our goals with our regional database,” he said. “So, I would expect that we would be a seller of a Strip asset, but that decision has not been made.”

It is uncertain whether the new company will venture into Japan, where major casino operators have set their sights after the nation legalized casino gambling last year. Reeg said “no firm decisions” had been made on the international market, but the opportunity would have to be “stupendous for us to be running in that direction.”

Copyright 2019 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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