Icahn deals high-stakes poker game for companies tied to gaming icons Carano, Sarno and Harrah By Howard Stutz, Executive Editor, CDC Gaming Reports March 19, 2019 at 7:13 pm The casino company founded by the late Don Carano could soon own properties associated with two other historical gaming figures, Bill Harrah and Jay Sarno. Orchestrating this proposed merger is billionaire corporate raider Carl Icahn. It seems like there should be a punchline somewhere. Reno-based Eldorado Resorts – the company Carano founded – is reportedly in talks to acquire gaming giant Caesars Entertainment. Roth Capital Partners gaming analyst David Bain speculated on March 6 that the potential deal would have a purchase price in excess of $9 billion. Macquarie Securities gaming analyst Chad Beynon said Monday that “on paper and in theory” the deal made sense. Representatives of Caesars and Eldorado were expected to attend Macquarie’s consumer conference Tuesday, which should make for an interesting discussion. However, Jefferies gaming analyst David Katz told investors Tuesday “a straightforward deal is unlikely, given the considerable hurdles.” The debate will be over the two companies’ combined leverage, number of properties, geography and corporate structures. Don Carano The gaming figures associated with Eldorado and Caesars are vastly different personalities. Eldorado patriarch Carano, who died in 2017, was one of the most influential figures in Reno’s history. In addition to the casino company, he built a powerful law firm (McDonald Carano) and one of California’s most successful wineries (Ferrari-Carano Vineyards). Eldorado Resorts literally began on the wrong side of the tracks. Carano was the first developer to build a hotel-casino on the north side of the railroad that runs through downtown Reno. After Eldorado showed success, other casino operators followed. Carano’s son Gary became CEO in 2014 and engineered three transformative deals; the 2014 buyout of MTR Gaming Group, the 2016 acquisition of Isle of Capri Casinos, and last year’s $1.8 billion purchase of Tropicana Entertainment, from Icahn, in partnership with Gaming and Leisure Properties. Carl Icahn From that single casino, Eldorado now operates 28 casinos in 13 states and provides jobs for more than 20,000 employees. Eldorado is again dealing with Icahn, who became Caesars’ largest shareholder after spending more than $1.023 billion to acquire a 17.75 percent stake in the casino giant, which operates almost 40 casinos in 13 states and the World Series of Poker. Icahn, whose middle name could probably be “hostile takeover” at this point, has long had success with gaming investments and divestments. He believes Caesars should be sold or merged with another casino operator. The company was created when Harrah’s Entertainment acquired Caesars Entertainment in June 2005 in a $9 billion buyout, at the time the gaming industry’s largest-ever acquisition. Jay Sarno Caesars Palace in Las Vegas, the company’s flagship resort, was created and opened by Jay Sarno in 1966. Sarno, who died in 1984, had a “compulsive personality” that drove everything about his life, including gambling, business deals, eating and carousing, according to his biography, Grandissimo: The First Emperor of Las Vegas, by David G. Schwartz. Harrah’s was named for Bill Harrah, whose gaming company became the first to be traded on the New York Stock Exchange. Harrah was focused on “providing outstanding customer service and attention to detail” within the company’s properties, according to his Gaming Hall of Fame biography. He devoted much of his money to an automobile collection that was valued at more than $40 million after he passed away in 1978. Bill Harrah Harrah’s Entertainment took on the Caesars name after the company went private in 2008 following a $30.1 billion buyout by private equity firms TPG Capital and Apollo Global Management. But the recession and other factors – namely a gaming industry-high debt load of $23.5 billion – sent the company into a bankruptcy reorganization that would last 30 months. The company exited bankruptcy having shed $16 billion of debt but lost the ownership of almost two dozen resorts to VICI Properties. The real estate investment trust was created through the reorganization and leased operations of the properties back to Caesars. Reuters, which first reported the talks between Eldorado and Caesars on Sunday, said debt could complicate a deal; Caesars carries $9.1 billion in debt, while Eldorado has $3.3 billion. Katz said there is “significant overlap” in several markets – Reno-Lake Tahoe, Atlantic City, and Louisiana, among others – that could raise antitrust issues with the Federal Trade Commission. “Of course, potential non-traditional deals could include divesting assets to get (a deal) done, as well as the involvement of one or more additional partners,” Katz said. All this sounds like a high-stakes poker game with companies tied to three gaming industry icons serving as the pot. And Icahn is the dealer. Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at firstname.lastname@example.org. Follow @howardstutz on Twitter.