Eldorado Resorts Acquires Caesars In $17.3bln Deal

Eldorado Resorts Acquires Caesars In $17.3bln Deal
June 26, 2019

 

Eldorado Resorts, Inc. (Nasdaq: ERI) is acquiring Caesars Entertainment Corporation (Nasdaq: CZR) in a cash and stock deal worth $8.50 billion in order to scale its operations and compete with large enterprises such as Las Vegas Sands and Wynn Resorts. Following the news, Eldorado Resorts closed at $43.81, down $1.96 or -4.28% from prior close while Caesars Entertainment Corporation (CZR) ended the trading day at $11.56, up $0.12 or 1.05% from earlier close.

Reuters news reports confirmed that both parties have arrived at a deal earlier this week. Eldorado agreed to pay $13.01 per share of Caesar, representing a premium of 30% to the latter’s closing price on Friday.  Caesars emerged out of bankruptcy two years back. The company runs casinos with brands named Harrah’s and Horseshoe.

Caesars has a long-term debt of $8.79 billion as of March 31st. In nine US states and three continents, Caesars own and manage 34 properties. Including debt, the value of the acquisition deal stands at $17.30 billion. Likewise, Eldorado has a long-term debt of about $3.06 billion and a market value of roughly $4 billion. In 12 US states, Eldorado operates 26 properties.

Following the merger, which is expected to be completed in the first half of 2020, shareholders of Eldorado and Caesars will hold 51% and 49% stake in the merged company’s outstanding shares.  The merged entity will use Caesars’ name and administer 60 casinos across 16 US states. Out of the 11 board members, six would be from Eldorado, while five would be from Caesars. At the same time, the combined firm intends to sell a portion of its real estate to VICI Properties and generate $3.20 billion, which will be used to clear debt.

The acquisition has happened three months after Caesars accepted to give three board seats to billionaire investor Carl Icahn, in addition to a say on the next CEO of the company. Icahn, who had a 14.75% ownership in Caesars at the end of March quarter, was putting pressure on the management to sell itself.

The price per share paid by Eldorado to Caesars is 51% higher than the latter’s closing price on the day (March 1st) before representatives of Icahn became a member of Caesars’ board.

Icahn said he was “pleased” by the deal announcement.

Icahn, who was happy about the acquisition deal, commented as follows: “It is rare that you see a merger where because of the great synergies ‘one plus one equals five.’ I look forward to seeing our investment prosper. While I criticized the Caesars board when I took a major position several months ago, I would now like to do something that I rarely do, which is to praise a board of directors for acting responsibly and decisively in negotiating and approving this transformational transaction.”

J.P. Morgan, Macquarie Capital, and Credit Suisse acted as financial advisers to Eldorado, while Latham & Watkins and Milbank served as its legal advisors. Likewise, PJT Partners acted as advisors to Caesars on the acquisition deal, while Meagher & Flom, Skadden, Slate and Arps, provided the requisite legal advisory.

The acquisition news is anticipated to keep the stock of Caesars bullish in the days ahead.

The historical price chart indicates that the stock has closed above its 50-day moving average. Additionally, the stochastic indicator is in the bullish zone. As a result, we can expect the stock to move up in the short-term.

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Ian Maguire

Ian Maguire

Ian is our resident contributor to the latest going ons in the cryptomarket, keeping up to date with the latest icos and coins


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