Eldorado Finally Wins New Jersey Approval to Acquire Caesars, Checks Last Regulatory Box

Posted on: July 17, 2020, 12:24h. 

Last updated on: July 17, 2020, 01:48h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

After more than two days of testimony from economists, executives, and other experts, the New Jersey Casino Control Commission (CCC) finally signed off on Eldorado Resorts’ (NASDAQ:ERI) $17.3 billion acquisition of Caesars Entertainment (NASDAQ:CZR). That perhaps paves the way for the deal to close before the end of July.

NJ Regulators Approve Eldorado
New Jersey regulators finally cleared the way for Eldorado to buy Caesars Entertainment, bringing Caesars Palace Atlantic City (seen here) under new management. (Image: Philadelphia Business Journal)

New Jersey represented that last regulatory hurdle for Eldorado in its quest to form the largest US gaming company by number of properties. In late June, the Federal Trade Commission (FTC) signed off on the purchase, followed by four regulatory agencies in Nevada and Indiana this month.

The deal easily went through the Silver and Hoosier states regulatory inquiries, and just one member of the FTC objected to the marriage. But things were stickier in New Jersey, where proceedings dragged into a third day as some experts voiced concern about concentration risk on the Atlantic City boardwalk, and macro factors, such as the coronavirus pandemic, that are beyond ERI’s control.

Eldorado executives have been honest about the challenges that lie ahead and acknowledged the importance of Atlantic City to their success,” said CCC Chairman James Plousis.

The combined company, referred to by ERI executives as the “new Caesars,” will control four of the nine boardwalk casinos. But the number will drop to three when the sale of Bally’s to Twin River Worldwide Holdings (NYSE:TRWH) is finalized.

Showing Boardwalk Commitment

As part of an agreement to move the deal forward, ERI agreed to lift deed restrictions on the Showboat Hotel Atlantic City, The Claridge hotel, and the former Atlantic Club Casino Hotel, which are old Caesars properties.

That could set the stage for another operator to enter the already crowded Atlantic City market. Hard Rock Atlantic City and the Ocean Casino Resort, the operators of the two newest Boardwalk venues, wanted to comment before the CCC to express concerns about the elimination of deed controls on the aforementioned properties. But commissioners told those operators it was too late.

Of the Claridge, Club Casino, and Showboat, only the Showboat is seen as a viable contender to re-start some type of gaming operations. But experts believe even that’s a stretch.

In addition to the deed lifts, ERI told New Jersey regulators it’s creating a $400 million account to fund updates at Caesars Palace, Harrah’s, and the Tropicana. That number will rise to $525 million if the Bally’s sale doesn’t happen. Those investments will be made over the next three years. After that, five percent of revenue will be allocated to enhancing the properties.

ERI also agreed to a five-year moratorium on closing any of its Garden State venues.

What’s Next

The new company will bear the Caesars’ name but will be run by ERI management. Investors of the regional gaming firm will control 56 percent of the new entity, with Caesar shareholders owning the rest. Financier Carl Icahn, viewed as the architect of the deal, will own 10 percent of the new operator.

The combined ERI/Caesars will run 52 gaming venues in 16 states, but more sales are expected. For example, three of the company’s five Indiana properties could be sold, as well as one or two of Caesars’ Las Vegas Strip casinos.

Divestments are viewed as pivotal in ERI’s goal of realizing at least $500 million in cost savings via the acquisition, particularly because the buyer is taking on $8.8 billion in Caesars’ debt.