Caesars Agrees to Sell Southern Indiana Casino to Cherokees for $250 Million
Posted on: December 24, 2020, 11:14h.
Last updated on: December 24, 2020, 01:38h.
Caesars Entertainment Inc. announced on Thursday it has reached an agreement to sell Caesars Southern Indiana to the Eastern Band of Cherokee Indians for $250 million.
The deal has been in the works for several weeks.
According to the Caesars news release, both sides have entered into a long-term licensing agreement to continue using the Las Vegas-based company’s iconic gaming brand. The two entities have a working relationship, as Caesars operates the tribe’s casinos in North Carolina.
“Expanding our relationship with the Eastern Band of Cherokee Indians is an exciting event for Caesars Entertainment,” Caesars Entertainment CEO Tom Reeg said in a statement. “Since our partnership began back in 1996, we have admired their growth and the success of their properties. We look forward to increasing our relationship by extending the Caesars brand and Caesars Rewards loyalty program to them at Caesars Southern Indiana.”
Both sides expect the deal to close in the third quarter of 2021.
The deal comes roughly a year after Caesars moved gaming operations from a more than 20-year-old riverboat to a $90 million, land-based facility at its Elizabeth, Ind., campus.
The Indiana Gaming Commission required Caesars to find buyers for three of its five Indiana properties by Dec. 31 when it approved Eldorado Resort’s $17.3 billion takeover of the gaming company in July. In October, the company reached a deal with Twin River Worldwide Holdings (now known as Bally’s) to sell Tropicana Evansville.
Last month, the IGC approved a one-year extension for Caesars to divest Horseshoe Hammond in northwest Indiana.
The commission must also approve the purchase.
EBCI’s First Move Into Commercial Gaming
For the EBCI, the purchase ushers in a new era for the federally recognized sovereign nation. It marks the first commercial casino purchase for the tribe.
The purchase of Caesars Southern Indiana operating company marks the beginning of an exciting new future for the Eastern Band of Cherokee Indians,” said Richard Sneed, Principal Chief Eastern Band of Cherokee Indians. “We are pleased to build upon our long-standing partnership with Caesars as we look to advance our interests in commercial gaming in the coming years.”
EBCI also has created a limited liability company that will serve as its vehicle to acquire and operate commercial casinos. Former Caesars executive Scott Barber, who has consulted with tribal officials on the commercial gaming venture, had been recommended to become the LLC’s CEO.
Under Indiana law, the tribe will only be able to directly receive 25 percent of the casino’s annual revenues. However, the LLC can use the remainder to reinvest in the property and expand into other commercial gaming markets.
Caesars Southern Indiana, located across the Ohio River from Louisville, Ky., ranks the state’s more profitable casinos. In November, the IGC reported the casino generated $14.4 million in adjusted gross revenues. Only three in state casinos reported higher totals.
In addition, EBCI would likely be able to take advantage of the casino’s three mobile sports betting skins – all of which are currently unused – to create more revenue. Indiana lawmakers are also likely to consider mobile casino gaming in the 2021 General Assembly session. That would also establish a new revenue stream.
EBCI Tribal Gaming Faces Threats
Tribal leaders are looking to commercial gaming to offset losses it expects at its tribal gaming enterprise. Commercial casino gaming is slated to come to Virginia perhaps as early as 2021, and the Catawba Nation, a South Carolina-based tribe, has received approval to build a $273 million casino resort near Charlotte.
EBCI is suing in federal court to prevent the project from moving forward. In the suit, it claims undue political influence led to its approval. In addition, the property in question may have ancestral ties to the Cherokees.
Sneed told council members the tribe could face a loss of up to $100 million in gaming revenue. EBCI uses that money to provide such services as health care, education, and housing to members.
He previously told the tribe it would take purchasing three commercial casinos to make up for those anticipated losses.
Cherokees Had Exclusive Window
Last month, the tribe entered into an exclusive 45-day negotiating window with Caesars to buy the Indiana property. It earned that right by outbidding more than 20 other entities, Sneed stated in a Tribal Council meeting.
The Tribal Council last week approved spending up to $280 million on the purchase of Caesars Southern Indiana casino operations. That includes using up to $120 million in cash from established tribal funds.
Discussions about the purchase became contentious at times. Some Tribal Council members questioned a proposal that would dip into a debt-repayment fund and other endowments to cover the $120 million. Eventually, tribal leaders agreed to identify the most advantageous way to fund the purchase.
Vici Properties, a real estate investment trust, will still maintain ownership of the southern Indiana casino. In the release, EBCI will enter into a new lease with the publicly traded company. Annual payments to Vici will start at $32.5 million.
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