The Federal Trade Commission conditionally approved the $17.3 billion merger between Eldorado Resorts and Caesars Entertainment Friday – 367 days after the gaming transaction was announced.
In a statement, the FTC said it is requiring Reno-based Eldorado to sell two casinos in Lake Tahoe, Nevada, and Shreveport, Louisiana “in order to move forward with the merger.” The FTC, which rules on federal antitrust issues on major business mergers, said the merger “likely would be anticompetitive in those markets.”
In April, Eldorado agreed to sell Eldorado Shreveport and the operations of MontBleu Resort Casino in Lake Tahoe to Rhode Island-based Twin River Worldwide Holdings for a combined $155 million.
Also, the FTC wants Eldorado’s planned sale of the Isle of Capri Kansas City to Twin River be completed in 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 the time frame, “the Commission may, at its discretion, require Eldorado to divest the casino to a Commission-approved buyer within 12 months.”
The FTC approval was one of the last major hurdles standing in the way of the Eldorado-Caesars transaction, which was announced on June 24, 2019. Gaming regulators in Nevada, Indiana, and New Jersey still need to approve the transaction, which will create a regional gaming company with nearly 60 properties in 16 states.
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 retain the Caesars’ name.
In a statement, Reeg said the company was satisfied with the consent order of the FTC under the agency’s Hart-Scott-Rodino review.
“We are delighted to announce the FTC’s approval of our planned merger with Caesars, which is expected to create the largest owner and operator of U.S. gaming assets,” Reeg said in a statement. “We look forward to completing the merger, subject to receipt of the remaining consents and approvals from regulators in Nevada, New Jersey, and Indiana.”
Caesars released a similar statement from CEO Tony Rodio who expressed support in completing the merger.
SunTrust Robinson gaming analyst Barry Jonas told investors he didn’t expect any issues to crop up with Eldorado’s pending casino sales to Twin River. He expects the transaction to close by mid-July.
The nearly three-month shutdown of the nation’s casino industry due to the coronavirus pandemic slowed the completion of the Eldorado-Caesars merger. Eldorado originally had a deal in place to sell MontBleu and Eldorado Shreveport to Las Vegas-based Maverick Gaming before the pandemic hit. But financial considerations caused the companies to cancel the transaction and Twin River stepped into the buyer’s role.
Split FTC vote
The FTC voted 3-1-1 to accept the terms of the complaint and consent order, with one commissioner not participating. Commissioner Rohit Chopra voted no and issued a dissenting statement, questioning Twin River’s ability to complete the purchase of the transactions.
Chopra, an FTC commissioner since 2018, said the commission should not agree to merger settlements “unless divestitures are completed promptly to a qualified buyer ready and willing to compete on day one.”
He said in his dissenting opinion the FTC was “rolling the dice with this complex settlement that will clearly not lead to an immediate restoration of lost competition” in the Lake Tahoe, Shreveport, and Kansas City markets.
“It is also clear that we must revamp our approach when it comes to vetting proposed divestiture buyers, particularly when a new financial investor is in charge in the boardroom,” Chopra wrote.
Additional approvals
Indiana gaming regulators have set a hearing on the Eldorado-Caesars merger for July 10. Eldorado officials said the company would likely sell two of the five Indiana casinos the company will control post-merger.
Four of the five casinos are currently owned by Caesars – Hoosier Park in Anderson, Indiana Grand in Shelbyville, Horseshoe Hammond, and Horseshoe Southern Indiana in Elizabeth. Eldorado owns Tropicana Evansville.
Twin River is also buying Bally’s Atlantic City from Caesars and real estate investment trust VICI Properties for $25 million. Post-merger, Eldorado will control three Atlantic City properties: Tropicana, Caesars, and Harrah’s.
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Eldorado is raising more than $3 billion in new debt to help finance the transaction and another $772 million from a stock sale to boost its liquidity. The company is forecasting $800 million in cost savings from the transaction, which includes $400 million in previously discussed savings and an additional $400 million in cost savings related to COVID-19.
Jonas told investors he expects the remaining regulatory bodies to approve the transaction, noting the delay has “been entirely attributable to waiting for FTC ruling and COVID-19 preventing regularly scheduled (regulatory) sessions.”
Shares of Eldorado closed at $36.15 Friday, down $2.45 or 6.35%. Caesars closed at $11.75, down 20 cents or 1.67%. Twin Rivers closed at $20.88, down 63 cents or 2.93%. The declines were due to the stock markets falling in response to increased coronavirus concerns.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
