Prior to Eldorado Acquisition Offer, Caesars Scuttled Australia Gold Coast Plans

Posted on: June 27, 2019, 02:04h. 

Last updated on: June 27, 2019, 02:04h.

Before news broke Monday that Eldorado Resorts, Inc. (NASDAQ:ERI) is looking to buy Caesars Entertainment Corp. (NASDAQ:CZR) for $17.3 billion, the Caesars Palace operator scrapped plans to potentially open an integrated resort in Australia.

Caesars Entertainment could see international expansion efforts halted by acquirer Eldorado Resorts. (Image: Shutterstock)

Caesars, which had been eyeing Queensland along Australia’s Gold Coast as a possible destination in its international expansion plans for at least two years, reportedly decided several weeks ago that it would not move forward with trying to win a license there.

Some reports indicate Caesars did not give a reason for scuttling its Australia overture and while the decision was reportedly made several weeks before the Eldorado offer became official, several factors are widely known about Eldorado’s interest in the operator of the Flamingo and Bally’s.

First, the regional gaming operator’s interest in Caesars dates back to the fall of 2018. Second, the sides entered into talks about a possible combination in March. Third, it is widely known Eldorado is seeking to trim at least $500 million in expenses at Caesars, a mark that could be difficult to hit with imminent international expansion.

International Plans

Under the Caesars, Horseshoe and Harrah’s names, among others, Caesars Entertainment operates gaming properties on three continents outside North America, where it has a footprint in more than a dozen US states as well as Canada.

While the company does not have a presence in highly profitable markets such as Macau and Singapore as some of its Las Vegas rivals do, Caesars has previously mulled other ex-US markets. At the BgC (Brazilian Gaming Congress) 2019 earlier this week, Caesars Vice President of Government Relations John Maddox affirmed his company’s interest in integrated resort possibilities in Brazil.

However, Eldorado management, which will takeover the day-to-day operations of the combined company when the purchase closes in the first half of 2020, does not manage gaming properties outside the US. The Reno-based company runs 26 casinos in 12 states.

On a call with analysts and investors earlier this week following announcement of the bid for Caesars, Eldorado CEO Tom Reeg confirmed that the companies will look to sell some properties in markets where both firms currently operate and that sales of some Caesars Las Vegas Strip venues are possible.

Reeg noted that no commitments have been made on expanding outside the US, but added opportunities to venture into international markets would need to be “stupendous for us to be running in that direction.”

Where This Leaves Australia

As for the land down under, the Gold Coast still has Star Entertainment Group’s Star Gold Coast, home to more than 70 table games and over 1,600 electronic gaming machines. Australia-based Star Entertainment has already spent $593 million to spruce up that property and has signaled it could put another $1.39 billion into expanding the venue.

Casino operators’ interest in the Gold Coast, a region south of Brisbane, is sensible because the area has a climate comparable to Southern California’s and is a prime tourist spot with destinations including Sea World and several amusement parks.

Home to about half a million people, Gold Coast is Australia’s sixth-largest city and its population is expected to swell to over 800,000 by 2035.

On an annual basis, tourism adds nearly $3.5 billion to the local economy.