Eldorado Resorts said Tuesday it agreed to sell its management stake in the Montbleu Resort in Lake Tahoe, Nevada, which would resolve one of the federal anti-trust issues hanging over the company’s $17.3 billion merger with Caesars Entertainment.
In a brief statement, Eldorado it into a “definitive agreement” to sell Montbleu to Las Vegas-Maverick Gaming. A purchase price was not announced, and the deal is expected to close in the second half of the year.
Deutsche Bank gaming analyst Carlo Santarelli, in a note to investors shortly after the transaction was announced, said Montbleu generated less than $10 million in annual cash flow.
“In the context of the pro forma structure, we find what was likely to be a low transaction multiple immaterial,” Santarelli said.
Privately held Maverick owns four casinos in rural Nevada; Wendover Nugget and Red Garter hotels in Wendover, and the Red Lion Casino, Gold Country Casino and its attached High Desert Inn, in Elko.
Maverick’s Nevada properties will total 1,600 hotel rooms more than 2,100 slot machines when the Montbleu deal closes.
“We see great opportunity in Northern Nevada and the Reno Tahoe market and are actively seeking more distribution there,” Maverick CEO Eric Persson said in a statement.
Maverick, which was founded in 2017, has three casinos in Colorado and 19 cardroom casinos in Washington.
Last year, Eldorado CEO Tom Reeg said “Northwest Louisiana and in the Tahoe area” are “markets where you should expect us to be active” in terms of a casino sale prior to the Caesars merger closing, alluding to the merger gaining approval from the Federal Trade Commission.
In January, Eldorado agreed to sell the Eldorado Shreveport in Louisiana to Maverick Gaming for $230 million. The transaction is also expected to close in the second half of the year.
Las Vegas-based Caesars owns the South Lake Tahoe’s market’s two dominant properties, Harvey’s Resort and Harrah’s Tahoe, which are connected via a pedestrian tunnel underneath Highway 50. Eldorado controls Montbleu, which the company acquired in 2018 as part of its $1.8 billion purchase of Carl Icahn’s Tropicana Entertainment.
Eldorado owns the operations of Montbleu. The land and buildings are leased from Edgewood Companies, which also owns the nearby Edgewood Golf Course. Eldorado entered into a 15-year lease for the property with renewals of up to 20 years.
Most gaming observers believed the nearly 500-room Montbleu, which borders a portion of the Heavenly ski resort at the corner of Highway 50 and Lake Parkway, was for sale. The property has nearly 600 slot machines, 30 table games, a 1,200-seat showroom, and four restaurants.
“The agreement to divest Montbleu is consistent with our continued focus on the expected closing for the Caesars transaction in the first half of 2020,” Reeg said.
Santarelli told investors he expected the FTC’s review of the Eldorado-Caesars deal “will be finalized in the very near term, if it has not already concluded.”
Seven states have approved the Eldorado-Caesars merger with approvals still required from more than a dozen other states, including Nevada.
Shares of Eldorado, which dipped to a 52-week low on Monday, rebounded Tuesday to close at $29.05 on the Nasdaq, up $2.61 or 9.87%.
Jefferies gaming analyst David Katz, in a note to investors Tuesday, called the Montbleu sale “a critical regulatory requirement.
“The progress toward closing on the Caesars merger continues as expected, despite the public market volatility,” Katz said. “Near-term concerns over the ability to raise debt, cancellations in Las Vegas and the ability to immediately divest an asset post-closing have weighed on the shares but are short-term issues that may defer but not erase the opportunity.”
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
