The CEO of Eldorado Resorts admitted Monday that the company had considered the prospects of pulling the plug on its $17.3 billion merger with Caesars Entertainment back in March, when the growing COVID-19 coronavirus pandemic forced the closures of casinos across the U.S.
The notion was quickly dismissed.
“We analyze every possible scenario,” Eldorado CEO Tom Reeg said on the regional casino company’s first-quarter conference call with analysts. He said financing for the transaction was in place long before COVID-19 disrupted both the casino industry and the nation’s economy.
And, he said, the financing is still there.
“It’s very clear to us the best option is to continue and close the Caesars transaction,” Reeg said. “It wasn’t a difficult decision. Everything we liked about the deal still holds up, and we’re looking forward to closing the transaction and getting underway.”
Eldorado is the acquiring company; its management will control the merged operation out of its corporate offices in Reno, Nevada. Reeg will be CEO of the combined company and has long targeted the end of June for closing the deal, which was announced nearly 11 months ago.
On Monday, however, he hinted there was a slight chance the closing could fall into July if one of three state regulatory agencies is not able to get the transaction on its agenda either this month or in June.
“I’d say it’s slim,” Reeg said. The transaction would create the nation’s largest regional casino company, with a total of nearly 60 properties in 16 states.
Reeg spent much of the conference call discussing the Caesars acquisition, rather than Eldorado’s first-quarter results, which were heavily impacted by the closures of the company’s 23 properties in 11 states due to efforts to slow the spreading virus.
Eldorado saw revenues decline by 17.5% in the quarter that ended March 31, with cash flow down 33%. The company took a net quarterly loss of $175.6 million.
Reeg said revenues were up 6.6% and cash flow was up 24.7% in the first two months of the year. “However, the strength in January and February was offset by COVID-19 related weakness, due to the mandated closure of all our properties by March 18.”
Eldorado furloughed 90% of its nationwide workforce, reduced the base salaries of its top executives, and cut other costs. The company has more than $670 million on its balance sheet and is spending $1.7 million a day to keep its closed resorts operational.
Meanwhile, Eldorado is anticipating reopening much of its portfolio – potentially beginning this weekend in Louisiana – and stretching into sometime in June.
In addition to the reopening efforts, closing the Caesars transaction is a company focus.
Eldorado cleared up a major roadblock in the deal by agreeing last month to sell Eldorado Shreveport in Louisiana and the operations of MontBleu Resort Casino in Lake Tahoe, Nevada to Twin River Worldwide Holdings for a combined $155 million, clearing up potential federal antitrust issues in both markets.
The company had a previous agreement to sell both properties to Las Vegas-based Maverick Gaming, but Reeg said Monday there were Federal Trade Commission concerns “with the buyer” that forced the company to look elsewhere. Eldorado took less money to move the properties off its books.
Eldorado also has another deal in place to sell Isle of Capri Kansas City in Missouri and Lady Luck Vicksburg in Mississippi for $230 million to Twin River, which also clears up antitrust matters.
Reeg said he was hopeful the FTC would grant its approval, allowing gaming regulators in Nevada, New Jersey, and Indiana to approve the transaction.
Shares of Eldorado closed at $20.62 on the Nasdaq Monday, down 47 cents or 2.23%.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
