Eldorado Resorts Selling Three Casinos, Could Hint Company Nearing Deal for Caesars Entertainment
Posted on: June 17, 2019, 09:18h.
Last updated on: June 17, 2019, 09:18h.
Reno-based Eldorado Resorts is selling three of its casinos in a joint deal with Century Casinos and VICI Properties for $385 million. The move could hint that a takeover of Caesars Entertainment is officially in the works.
Eldorado is selling the Mountaineer Casino Racetrack and Resort in West Virginia, and the Isle Casino Cape Girardeau and Lady Luck Casino – both in Missouri. Century Casinos will pay Eldorado $107 million for the operating rights, while VICI Properties will pay $278 million for the physical assets.
VICI is the real estate investment trust (REIT) of Caesars. REITs own the actual property, and lease back their operations to the casino firm.
Eldorado CEO Tom Reeg said the sale is “consistent with our continued focus on optimizing the results from our regional gaming platform, generating growth through strategic acquisitions and realizing value through sales.”
“The sale price for these three properties represents an attractive multiple of their aggregate trailing twelve months cash flows and provides additional capital that we expect to deploy for shareholder value enhancing initiatives,” the chief executive explained.
There’s plenty of speculation that Eldorado Resorts is the leading candidate to acquire the larger Caesars Entertainment.
Although we have no direct insight into the matter, we suspect investors will speculate as to whether or not this could be Eldorado’s first step toward making another transformational acquisition in the space,” Steven Wieczynski, a gaming analyst at Stifel said in a note.
The three casinos being sold could be an effort to ease federal anti-trust worries should Eldorado make a move for Caesars. Deutsche Bank gaming analyst Carlo Santarelli said Missouri specifically posed the greatest concern.
Eldorado operates 26 casinos in 12 states, while Caesars operates nearly 40 in 13 states. The latter company of course has a strong presence in Las Vegas – the casino giant claiming nine properties on or near the Strip.
Eldorado has specialized in regional casinos outside of Sin City. Acquiring Caesars would naturally make the company one of the largest firms in the gaming industry.
Investors seemed to like the news that Eldorado is unloading three of its regional casinos. Traded on the NASDAQ, shares were up around two percent in early Monday trading.
Eldorado has been one of the more attractive gaming industry stocks in recent years. Investors have been handsomely rewarded for holding stake in the casino operator, as shares have flourished from $10.50 in 2016, to around $53 this week – a more than 400 percent return.
The same cannot be said of Caesars. The company filed for Chapter 11 bankruptcy protection in January 2015. That led to several activist investors grabbing up considerable stake in the organization.
Most notable is billionaire Carl Icahn, who now controls 29 percent of the casino company and has been leading the push for the corporation to sell. Caesars shares have fluctuated wildly during the rumored acquisition process.
Caesars is hovering around $9.90 today.
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