In one day in April, Eldorado Resorts Inc added eight casinos to its portfolio; seven came from buying Carl Icahn’s Tropicana Company and the other, a casino in Illinois purchased from Caesars. Those purchases are the latest move in the company’s dramatic expansion that began in 2005, when it bought a Hollywood riverboat casino in Shreveport, Louisiana. The $230 million Hollywood casino was in bankruptcy after struggling with debt since it opened in 2000; Eldorado paid $154 million for it. With the acquisition of the Hollywood casino, Eldorado embarked on its journey to diversification.
Eldorado Resorts began life as a small casino in Reno, Nevada in 1973. The Eldorado Casino Hotel was built outside of the casino district, north of the railroad tracks. It had just 200 slot machines, 12 tables and 282 hotel rooms. Don Carano was the driving force behind the operations and in time all of Don’s children came to work in the casino. The senior Carano’s philosophy is still followed by his children in operating the company’s many casinos. When Eldorado moved to add a casino in Louisiana to the Nevada operations, it was very clear that the Reno market was always going to be challenged by Indian casinos in surrounding states. The Carano move to diversify out of Nevada made perfect sense. In fact in retrospect it appears to be the only successful strategy for Reno casino operators.
In 2013, Eldorado announced a merger with MTR Gaming. That merger was finalized in 2014 and immediately afterwards, Eldorado went public. MTR added three properties and brought the value of the new company up to the billion dollar mark. In July 2015, Eldorado acquired the remaining 50 percent ownership of the Silver Legacy in Reno and bought Circus Circus. In 2017, the company received final approvals for its takeover of Isle of Capri’s 13 casinos for $1.7 billion; at that time Eldorado had 20 casinos in ten states. In just twelve years, Eldorado had added 16 properties in nine states to its operations.
However, that was not the last chapter in this story of growth and diversification. In April of this year, there was another announcement. Carl Icahn had agreed to sell his seven casinos to Gaming and Leisure Properties Inc., a REIT. Eldorado will lease those seven casinos and operate them for an annual fee of $110 million, after paying an initial $640 million for the leases. And just because it was in the buying mood, Eldorado Resorts announced the purchase of the Grand Victoria in Elgin, Illinois for $327 million. Upon completion of all pending transactions, Eldorado said its expanded property portfolio will feature approximately 26,800 slot machines and VLTs, more than 800 table games and over 12,500 hotel rooms.
The Icahn transaction is definitive for both companies. Carl Icahn is an investor; he buys properties and companies as an investment. He purchases at a low point in a market and sells when conditions have improved to attract buyers. At the same time Icahn was selling Tropicana for $1.7 billion, he also sold an automotive supplier, Federal Mogul, for $5.4 billion. He has been in and out of gaming several times, usually pocketing a billion dollars or more upon his exit. Eldorado on the other hand is an operating company; it buys casinos to own and operate. Each new casino is taken as an opportunity to improve its operations with the philosophies and strategies of the founder, Don Carano. Although, Eldorado may sell some of the properties it acquires, that is done to concentrate better on the remaining ones. Regardless of how many casinos Carl Icahn has owned, he is not a “casino guy.” Icahn is always just passing through, while the driving force behind Eldorado Resorts, the Carano family, is here for the duration.
Consolidation is always part of the maturation of any industry. When the initial growth and expansion phase of an industry has slowed, consolidation begins; the strongest companies continue to survive, profit and grow by acquiring the smaller, weaker ones. The Eldorado is a current example of the trend in gaming. MGM, Caesars, Boyd, Churchill Downs and Penn National are all products of consolidation. It took the better part of forty years, but Eldorado Resorts has moved from one small casino in Reno to a national company, one of the largest casino companies in the gaming industry. I am certain that Don Carano would have been proud of the company’s latest acquisitions. He was a man of big dreams and he built a company with equally big dreams.
