Eldorado Resorts has been trying to acquire Caesars Entertainment for quite some time, but the deal has taken a long time to go through. The deal finally became official earlier this week, and it is expected to be completed by the end of July.
The New Jersey Casino Control Commission was the last hurdle that needed to be climbed before the deal was complete, and it wasn’t an easy decision. There were more than two full days of testimony from executives, economists, and other industry experts.
Now that the state of New Jersey has officially signed off on the deal, the merger will create the largest US Gaming company in the United States in terms of the number of properties. The Federal Trade Commission (FTC) gave initial approval in June, and it paved the way for individual states to have their say on the matter.
Both Indiana and Nevada were the first states to make a ruling on the merger, and four different agencies agreed to let the deal happen. Those two states gave approval without any hesitation, but that wasn’t the case in New Jersey.
Most of the discussion in New Jersey centered around the potential for a monopoly in Atlantic City, and what that could do to the famous boardwalk. The coronavirus pandemic also had some Casino Control Commission executives worried about the financial implications of this deal.
After this deal goes through at the end of the month, the “new Caesars” will own four of the nine Atlantic City casinos. Eldorado Resorts Inc (ERI) will be selling one of these properties, Bally’s Wild West, to Twin River Holdings later this year.
Even though the current pandemic has affected both companies that are a part of this merger, the two companies kept the same deal in place. ERI is expected to make up for any lost revenue as a part of this deal almost immediately.
What Happens Now?
Even though ERI now owns a majority of the company, the company will still bear the Caesars name. ERI management will take over the properties, but customers won’t notice much of a change at first.
Shareholders of ERI will now hold 56 percent of the new company, while Caesars shareholders will own the rest. Carl Icahn, the man that put this deal together, will own 10 percent of the new company.
When this deal is finally complete, the new ERI/Caesars company will operate more than 50 gaming properties in 16 different states. This number is expected to lower over the next few years, as the company will be looking to sell a number of its properties.
ERI has also agreed to lift some deed restrictions for some old Caesars properties on the Atlantic City boardwalk. These properties include The Claridge Hotel, Showboat Hotel Atlantic City, and the Atlantic Club Casino Hotel.
By releasing some deed restrictions on three properties on the boardwalk, it could give another operator a chance to enter an already crowded market in New Jersey. Other current operators were not in favor of the deed restrictions being lifted, but they voiced their concerns too late in the process.
The new ERI/Caesars company is not expected to turn any of the former properties into gaming venues, but an outside operator could decide to give it a go. The Showboat Hotel Atlantic City is the only viable option for resuming gambling operations in New Jersey.
ERI is also committing more than $400 million to renovate the three former Caesars properties in New Jersey. These renovations will take place over the next three years, but the new company will continue to make improvements using five percent of all revenue each year.