Century not the only small casino company active in the acquisition market By Howard Stutz, Executive Editor, CDC Gaming Reports June 18, 2019 at 5:55 pm Outside of Colorado and Alberta, Canada, only savvy investors knew much about Century Casinos before Monday. Union Gaming Group analyst John DeCree said the investment community will likely be learning about other small, under-the-radar casino companies in the coming months. The $385 million deal between Eldorado Resorts, Century and real estate investment trust VICI Properties wasn’t just one piece helping to unlock a gaming-industry-changing multi-billion merger. The deal signaled a potential wave of gaming industry mergers and acquisitions that could reshape casino ownership over the next 12-to-18 months. “Larger gaming companies have indicated the desire to clean up their portfolios after significant consolidation, divesting assets that are too small to warrant significant attention,” DeCree told investors in a research note. Century Casino Central City, Colorado. In addition to Century, he cited Reno-based Monarch Resorts, Rhode Island’s Twin River Worldwide Holdings, and two Las Vegas-based companies, Full House Resorts and Golden Entertainment, where a casino property that produces $20 million annually in cash flow could move the needle. “We expect similar deals to surface throughout the rest of 2019,” DeCree. For now, the focus is on the potential merger of Reno-based Eldorado and Las Vegas-based casino giant Caesars Entertainment. Eldorado currently operates 26 casinos in 12 states; Caesars operates close to 40 casinos in 13 states, including nine resorts on or near the Las Vegas Strip. A deal between the two companies – valued at more than $6 billion in some circles – is fraught with anti-trust issues. Deutsche Bank gaming analyst Carlo Santarelli, in a May 29 research report, cited five states with jurisdictions where the Federal Trade Commission might throw out a roadblock. Century, with help from VICI, stepped in and cleaned up one those troublesome markets – Missouri. In Monday’s deal, Las Vegas-based real estate investment trust VICI will acquire the land and buildings for Mountaineer Casino Racetrack and Resort in West Virginia, along with Isle Casino Cape Girardeau and Lady Luck Casino Caruthersville, both in Missouri, for $278 million. The Colorado-based Century Casinos will pay $107 million for the operations of the three properties and sign a 15-year lease agreement with VICI for annual rent of $25 per year. “This deal is clearly most important to Century, as it gives the company a number of wins, including increased North American exposure,” DeCree said. Century Casinos co-CEOs Erwin Haitzman (l) and Peter Hoetzinger (r). Century operates two casinos in Colorado – the Century properties in Cripple Creek and Central City – and a small handful of casinos and racetracks in Calgary and Edmonton. Outside the U.S., Century owns a 66.6 percent interest in a company that operates seven casinos throughout Poland, as well as stakes in casinos in England and other international markets. When the deal closes next year, Century will own 10 casinos in North America, which are expected to provide 96 percent of its annual cash flow before rent payments. Co-CEO Peter Hoetzinger said in a statement the transaction “will transform Century Casinos into a premier regional casino operator in North America. We believe these assets are a great fit for our portfolio and will complement Century Casinos’ expertise in operating small to mid-sized casinos.” The investment community liked the deal for Century, as the company’s shares jumped almost 12 percent in value on Monday. As for Reno-based Eldorado, DeCree doesn’t discount that the deal could be a precursor to an acquisition of Caesars, but indicated he believes the sale of the three smaller regional casinos improved the company’s balance sheet and freed up management’s time and focus. For Eldorado, $385 million is couch cushion change when it comes to financing a potential deal with Caesars, but the transaction smooths over a potential area of concern. When Penn National Gaming acquired Pinnacle Entertainment last year, Boyd Gaming eased potential anti-trust issues in Ohio, Missouri and Indiana by acquiring the operations of four properties. Other markets that Santarelli cited as troublesome in an Eldorado-Caesars marriage were Reno/Lake Tahoe, Laughlin in Nevada, Atlantic City, Indiana, and Louisiana. With MGM Resorts International also exploring options with its real estate holdings, the potential for smaller companies to step in and acquire a regional property – even a Las Vegas Strip resort, such as Planet Hollywood or the Rio – presents an intriguing possibility. Last month, Stifel analyst Brad Boyer suggested Twin River had expansion interest. The company currently owns two Rhode Island casinos, the Hard Rock in Biloxi, Mississippi, Dover Downs in Delaware, and a Colorado racetrack. In January, Twin River agreed to buy Affinity Gaming’s three casinos in Black Hawk, Colorado. Boyer told investors the company was positioned to “successfully source and execute accretive (mergers and acquisition) transactions that complement its existing portfolio.” The acquisition market is alive. Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at firstname.lastname@example.org. Follow @howardstutz on Twitter.