FTC dissenting commissioner: Eldorado-Caesars merger ‘risky for everyone involved’ By Howard Stutz, Executive Editor, CDC Gaming Reports June 30, 2020 at 8:00 pm Federal Trade Commission member Rohit Chopra went scorched-earth in his dissenting opinion in the Eldorado Resorts-Caesars Entertainment merger. No one was spared. In his four-page opposition, Chopra said there were “no noteworthy benefits to customers, workers, suppliers, or competition” from the $17.3 billion buyout of Caesars by Eldorado. “The transaction is risky for everyone involved,” he said. The Federal Trade Commission on Friday granted conditional approval of the Eldorado-Caesars deal, pending the finalization of the sale of two Eldorado casinos in Lake Tahoe, Nevada, and Shreveport, Louisiana to Twin River Worldwide Holdings. Chopra doesn’t seem to think the Rhode Island-based Twin River is up to the task. He said the company’s ownership change in 2019 made him uneasy. Rohit Chopra, FTC commissioner “I am concerned that the Commission is relying on Twin River’s past track record, rather than analyzing how changes in ownership and control of the company will impact their future business strategy,” he wrote. Despite the negative opinion by Chopra, the FTC voted 3-1-1- in favor of the transaction, and Reno-based Eldorado’s acquisition of Caesars is heading toward closing by middle to late July. The merger was announced 53 weeks ago and will create a regional gaming conglomerate with roughly 60 properties in 16 states. Gaming regulators in Indiana, Nevada, and New Jersey are expected to take the matter up in the near future, now that the FTC has granted conditional approval to the deal under the Hart-Scott-Rodino Act review. Chopra, who was nominated to his seat in October 2017 by President Donald Trump and confirmed unanimously by the U.S. Senate six months later, was long associated with efforts to reform the U.S student loan system. According to his FTC biography, Chopra “has actively advocated to promote a fair and fully functioning marketplace through vigorous agency enforcement that protects families and honest companies from those that break the law.” His concern with the Eldorado-Caesars merger is focused on the amount of debt Eldorado will carry post transaction, especially in the current COVID-19 era. Eldorado had nearly $3 billion in debt on its books at the end of March. That figure will jump to almost $13 billion once the companies are merged. However, the roughly $12 billion in long-term lease payments Eldorado will owe to real estate investment trusts Gaming and Leisure Properties and VICI Properties company increases the company’s total debt load to some $25 billion. Analysts said the investment community and common accounting principles count leases as debt. “The enormous amount of debt financing could materially increase the likelihood of financial distress of the combined casino conglomerate,” Chopra wrote. “Given the major financial uncertainties looming over the gaming industry stemming from the pandemic, as well as the industry’s past experiences with leveraged buyouts, the proposed transaction might make conditions even more fragile and precarious.” Eldorado is the acquiring company; its management will control the merged operation out of its corporate offices in Reno. Current Eldorado CEO Tom Reeg will be CEO of the combined company, which will also take on the Caesars’ name. Conditional approval notwithstanding, Twin River still needs to complete two purchases from Eldorado – a combined $155 million for Eldorado Shreveport in Louisiana and the casino operations of MontBleu Resort Casino in Lake Tahoe, Nevada. The FTC wants Eldorado’s planned sale of the Isle of Capri Kansas City to Twin River to be completed by 60 days after the Caesars acquisition closes “to prevent competitive harm” in the Missouri city. Eldorado announced plans earlier this year to sell the casino to Twin River, along with Lady Luck Vicksburg in Mississippi for a combined $230 million. If the Kansas City casino deal isn’t completed within that time frame, the FTC will require Eldorado to sell the casino to a buyer approved by the Commission within 12 months. “I have serious reservations about the terms of the settlement,” Chopra wrote. “As a policy matter, I disagree that the Commission should enter into risky, complicated settlements with delayed divestitures – like the resolution proposed here.” Twin River has been in expansion mode since 2019, acquiring Dover Downs in Delaware and three small casinos in Colorado. In addition to the four casinos it is buying from Eldorado, the company is acquiring Bally’s Atlantic City from Caesars and VICI. Chopra questioned if Twin River has enough in the tank to handle all the transactions. “I did not find any compelling evidence that Twin River will prioritize the divested assets to fully restore competitive intensity in the markets that the Commission believes would suffer from killed-off competition.” Chopra wrote. Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at firstname.lastname@example.org. Follow @howardstutz on Twitter.