Caesars, VICI Selling Harrah’s Louisiana Downs to Rubico Acquisition for $22 Million
Posted on: September 3, 2020, 03:09h.
Last updated on: September 3, 2020, 03:47h.
Caesars Entertainment (NASDAQ:CZR) and VICI Properties (NYSE:VICI) are selling the Harrah’s Louisiana Downs racino to Rubico Acquisition Corp. for $22 million.
The sale is the first asset divestment since the company, formerly known as Eldorado Resorts, finalized its $17.3 billion takeover of Caesars. It assumed the target’s name in the process in late July. The pari-mutuel transaction is slated to close by the end of this year or in early 2021.
The proceeds of the transactions shall be split $5.5 million to VICI Properties and $16.5 million to Caesars,” according to a statement.
VICI is a gaming real estate investment trust (REIT) spun off from the old version of Caesars several years ago, and acted as a vital conduit to driving the Eldorado acquisition across the finish line. VICI counted the buyer and the seller among its largest tenants and, in June, provided vital financing to Eldorado that helped seal the takeover.
The real estate firm owns Caesars Palace on the Las Vegas Strip, among a slew of other well-known gaming venues across the country, and new Caesars is its biggest client.
The old Eldorado previously jettisoned other racinos, including one around the time it announced a formal offer for Caesars in June 2019. Even with those moves, the operator brought a few pari-mutuel facilities to the table when it approached Caesars, and scooped up several more when that acquisition was completed.
However, today’s announcement of the Harrah’s Louisiana Downs sale is unlikely to be the last of new Caesars parting with racinos, as Indiana is expected to be prime territory for the gaming company to divest assets in an effort to raise cash and lower costs. In that state, Caesars controls Indiana Grand and Harrah’s Hoosier Park.
As for asset sales in the Pelican State, the fifth-largest US gaming market, those, too, were expected. When Eldorado announced its offer for Caesars last year, analysts pointed to Louisiana and Northern Nevada as regions where the operator was likely to sell properties, and it’s obliging.
With the pending sales of Eldorado Shreveport Resort and Casino and Harrah’s Louisiana Downs, Caesars’ portfolio in the state will be pared to four venues from six.
A $22 million sale generating proceeds of $16.5 million isn’t much of a needle-mover for Caesars. But it is an addition to post-deal cash-generating efforts that the investment community views as essential toward the operator’s goal of saving at least $500 million as a combined entity.
As for where the next sales could happen, Caesars didn’t comment along those lines. But Indiana makes sense, particularly if the operator wants to further reduce its racino portfolio.
A time line of 12 months to 18 months for selling a Las Vegas Strip property is likely to trend toward the higher end of that range, if not somewhat longer, due to depressed valuations on Sin City venues owing to the coronavirus pandemic.
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