Eldorado, Caesars ‘Marriage License’ Could be Considered by New Jersey Regulators in January 2020

Posted on: October 15, 2019, 09:38h. 

Last updated on: October 15, 2019, 11:20h.

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

Eldorado Resorts, Inc. (NASDAQ:ERI) filed a petition last month with New Jersey regulators pertaining to the company’s $17.3 billion takeover offer for Caesars Entertainment Corp. (NASDAQ:CZR), a matter Garden State officials could take up as soon as January.

Eldorado Resorts is ready to prove to New Jersey officials that its deal for Caesars won’t harm Atlantic City. (Image: Press of Atlantic City)

Reno-based Eldorado revealed its plan to acquire the operator of Caesars Palace in June, and since that time, the regional gaming company has been selling some assets to raise cash, to reduce geographic overlap between itself and Caesars, and to potentially avoid increased regulatory scrutiny in some markets.

In particular, New Jersey is one market where officials could take a close look at the proposed Eldorado/Caesars combination, because the pair currently control four of the nine casinos on the Atlantic City Boardwalk. Eldorado operates the Tropicana there, while Caesars runs Bally’s, Caesars Palace and Harrah’s.

The CCC must consider several factors before approving the merger, including whether a single casino gaming company operating four of Atlantic City’s nine properties would create an ‘undue economic concentration,’” reports The Press of Atlantic City.

The New Jersey Division of Gaming Enforcement (DGE) and the Casino Control Commission (CCC) must wait for investors in the two companies to approve the deal, something that could happen in mid-November, before considering the petition.

Plenty Of Speculation

In the nearly four months since Eldorado publicized its offer for Caesars, there has been ample speculation about how the deal could affect the Boardwalk, with much of that chatter focusing on Bally’s. Initially, talk centered on a potential closure of that venue, but the recent opening of an $11 million sportsbook there, coupled with the success of sports betting in New Jersey, may make Eldorado management reluctant to shutter the property.

Still, some industry insiders view Atlantic City as currently oversaturated. For example, Golden Nugget boss Tilman Fertita said last month it’s not a nine-casino market, and he’s perplexed as to why more people don’t realize that.

Assuming Eldorado does not divest an Atlantic City venue prior to or after finalizing the Caesars acquisition, the new company would employ 40 percent of the leisure and hospitality workers there, while combining for 37 percent of gaming revenue.

DGE data released in August indicate that amid increasing competition on the Boardwalk, operators pared staff by four percent, and some market observers are concerned about declines in occupancy and room rates with new hotel supply coming online.

Maybe There Won’t Be Sales

Underscoring the point that Eldorado may be loathe to jettison one of the four Atlantic City assets is talk that the company is prepared to allay the state’s “undue concentration” concerns.

“Eldorado and Caesars intend to present analysis and testimony from Timothy Watts, managing director of National Economic Research Associates, to demonstrate that the merger would not result in an undue concentration,” The Press of Atlantic City.

That report is expected to be submitted to regulators imminently. Other markets where the combined Eldorado/Caesars overlap and could shed some properties include Northern Nevada and some southern states.