Caesars Takeover Could Spark New Wave of Casino Deals, Says Analyst

• If a Caesars takeover happens, it could be “the first of many” in the casino industry, says Truist analyst Jonas
• Due to Caesars being a high-profile operator, boards at other gaming companies may be compelled to weigh takeovers
• Caesars has been bought and sold four times since 1999, most recently for $17.3 billion in 2020

If Caesars Entertainment (NASDAQ: CZR) changes hands again, that transaction could touch off a new wave of potential large-scale consolidation activity in the casino industry.

That’s the take of Truist Securities analyst Barry Jonas, who in a report out today notes Caesars is evaluating ways to create value for shareholders, and if the Harrah’s operator does change hands, more gaming industry transactions could be in the offing.

Still, there are multiple ways CZR management could be looking to engineer value (something we have published on multiple times over the past few years), and we think any transaction here to take advantage of lingering valuation dislocation could be the first of many,” observes the analyst.

He notes a potential deal for Caesars would actually be the second significant one in the industry in recent months, as Golden Entertainment (NASDAQ: GDEN) is in the process of being taken private in a $1.16 billion deal announced last November.

Caesars Takeover Could Spur Smaller Deals

The most recent, though unconfirmed speculation regarding Caesars is that the company is in a 45-day exclusive negotiating period with Tilman Fertitta. He reportedly offered $34 a share for the casino giant, narrowly besting a $33 a share bid reportedly submitted by Carl Icahn.

During an appearance before the Economic Club of Las Vegas last week, Jonas said the Caesars portfolio doesn’t need to be occupied by more than 50 properties, though he stopped short of identifying specific venues that could be jettisoned if Fertitta acquires the company.

Between Caesars and Golden Nugget, there’s geographic overlap in specific markets such as Atlantic City, NJ, Lake Tahoe, and Laughlin, Nevada, as well as some states in the Midwest and the South.

With Caesars, History Is Relevant

With Caesars again being the subject of takeover rumors, history is pertinent. The company has been bought and sold four times since 1999. The most recent of which was the $17.3 billion 2020 takeover by Eldorado Resorts that resulted in today’s version of the gaming company.

As Jonas pointed out last week at the Economic Club, one of those deals was the 2008 leveraged buyout of Caesars’ predecessor company, Harrah’s, by private equity firms Apollo Global and TPG Capital at a price of $27.8 billion.

That private transaction had disastrous consequences, with Caesars filing for bankruptcy protection in 2015 due to a suffocating debt burden. Four years later, Apollo and TPG liquidated their stakes in the gaming company.