Eldorado Resorts will acquire all outstanding shares of Caesars Entertainment Corp. in a deal reflecting total consideration of approximately $17.3 billion. The definitive merger agreement, already unanimously approved by both companies’ board of directors, is expected to be consummated in the first half of 2020.
The deal is subject to approval of the stockholders of Eldorado and Caesars, the approval of applicable gaming authorities, the expiration of the applicable Hart-Scott-Rodino waiting period and other customary closing conditions.
“Eldorado’s combination with Caesars will create the largest owner and operator of U.S. gaming assets and is a strategically, financially and operationally compelling opportunity that brings immediate and long-term value to stakeholders of both companies," Eldorado CEO Tom Reeg said in a statement. "Together, we will have an extremely powerful suite of iconic gaming and entertainment brands, as well as valuable strategic alliances with industry leaders in sports betting and online gaming. The combined entity will serve customers in essentially every major U.S. gaming market and will marry best-of-breed practices from both entities to ensure high levels of customer satisfaction and significant shareholder returns."
When the deal goes through, the combined company will represent approximately 60 casino-resorts and gaming facilities in the United States. Eldorado predicts, based on data from March 31, 2019, the combined company’s earnings before interest, taxes, depreciation, amortization and restructuring or rent costs will reach $3.6 billion.
“As with our past transactions, we have a detailed plan for significant synergy realization,” Reeg said. “Relative to our prior acquisitions, the combination with Caesars presents attractive incremental revenue synergy opportunities as we plan to strengthen Caesars Rewards, the industry’s leading player loyalty and [content-management system] database, and combine it with Eldorado’s to market to over 65 million rewards customers nationally. Additionally, the transaction bears benefits beyond the strategic merits of the combination with Caesars in isolation.”
Though the combined company will keep the Caesars name, Eldorado will maintain control, with its Chairman Gary Carano, CEO Tom Reeg, COO, CFO and CLO all staying in their current roles. The combined company’s board of directors will consist of 11 members, six from Eldorado’s board of directors and five from Caesars’ board of directors.
“I’m familiar with Eldorado and its management team, having worked with them on a previous transaction, and I look forward to collaborating with them to bring our companies together,” Tony Rodio, Caesars’ recently appointed CEO, said in a statement.
The $17.3 billion buyout comprises $7.2 billion in cash, approximately 77 million Eldorado common shares and the assumption of Caesars outstanding net debt. Eldorado and Caesars shareholders will hold approximately 51 and 49 percent of the combined company’s outstanding shares, respectively. Eldorado will acquire all Caesars’ outstanding shares for a total value of $12.75 per share, consisting of $8.40 per share in cash consideration and 0.0899 shares of Eldorado common stock for each Caesars share of common stock based on Eldorado’s 30-calendar-day volume weighted average price per share as of May 23.
To help finance the transaction, Eldorado has entered into a master transaction agreement with Vici properties worth $3.2 billion. Vici will acquire the real estate associated with Harrah’s Resort Atlantic City (N.J.), Harrah’s Laughlin (Nev.) Hotel & Casino and Harrah’s New Orleans Hotel & Casino for approximately $1.8 billion. The properties will be added to an existing master lease and will have an initial annual rent of about $154 million. Additionally, Eldorado will amend the terms of the existing Caesars Palace Las Vegas and Harrah's Las Vegas single-asset leases, combining them into a new Las Vegas master lease and increasing the annual rent payment, resulting in proceeds of approximately $1.4 billion.
The deal also gives Vici a put/call option on Caesars Centaur assets, exercisable between January 2022 and December 2024, and right of first refusal for whole asset sale or sale-leaseback transactions on two Las Vegas Strip properties and Horseshoe Casino Baltimore.
Eldorado owns and operates 26 properties in 12 states. Its properties represent more than 12,000 hotel rooms. Caesars owns and operates 34 casinos and resorts across nine states. Domestically, its properties include more than 39,000 hotel rooms. Its resorts operate primarily under the Harrah's, Caesars and Horseshoe brand names. It also owns the London Clubs International family of casinos.