Eldorado Procures Maryland Approval For Caesars Takeover, Expects Deal Will Finalize Early Q2

Posted on: February 28, 2020, 08:55h. 

Last updated on: February 28, 2020, 09:39h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Eldorado Resorts, Inc. (NASDAQ:ERI) has landed another state regulatory approval in its quest to acquire rival Caesars Entertainment Corp. (NASDAQ:CZR), as the Maryland State Lottery & Gaming Control Agency said Thursday it’s signing off on the deal.

Eldorado won approval for its Caesars buy in Maryland, where the latter operates Horseshoe Baltimore. (Image: Baltimore Sun)

On a conference call with analysts Wednesday regarding the company’s fourth-quarter earnings report, Eldorado CEO Tom Reeg noted he expects the $17.3 billion transaction that will create the largest domestic gaming company will be finalized early in the second quarter.

ERI announced that at a meeting today (Thursday), the Company received approval from the Maryland State Lottery & Gaming Control Agency in connection with its pending acquisition of Caesars Entertainment Corporation, subject to customary conditions,” according to a statement.

ERI has been accruing approvals for its Caesars acquisition at a steady clip this month. In addition to Maryland, Mississippi gave the green light for the takeover last week, with Pennsylvania and Iowa having done so earlier in February.

Easy Lift

As was the case with the Keystone State, ERI getting the go-ahead from Maryland regulators for the transaction was a relatively easy lift because the companies have no overlap in the Free State. ERI has no Maryland venues, while Caesars operates the Horseshoe Baltimore.

That property is part of a deal ERI struck with Vici Properties (NYSE:VICI) last June after announcing the Caesars takeover, whereby the real estate company has rights of first refusal to purchase Horseshoe Baltimore and lease it back to the seller.

While Horseshoe Baltimore has recently scuffled against other Maryland casinos, the property could become an important piece for the combined ERI/Caesars in the Mid-Atlantic region if the state approves sports betting, something voters there are largely divided on.

Important Comments

On the aforementioned conference call, Reeg noted that ERI will likely sell a property in Lake Tahoe and one on the Las Vegas Strip with the latter happening after the Caesars purchase is completed.

Analysts and investors have widely expected those moves to take place with the MontBleu Resort, Casino and Spa in Lake Tahoe identified as a likely divestment in that market. Reeg also said he doesn’t expect other asset sales to be necessary to gain various state regulatory approvals, potentially allaying concerns that the company would have to sell or close a venue on the Atlantic City, N.J. Boardwalk.

Analysts, including Roth Capital’s David Bain, applauded Reeg’s clarity on approvals and asset sales following the call.

“Catalysts are either under way or near-term: 1) Real-time continuation of state regulatory approvals for the CZR merger leading to a growing base of buyside/sellside models/valuations to reflect consummation and forward synergies; 2) tangible, front-end loaded CZR synergy harvesting beginning early 2Q19 (a timeline management cited/reiterated on yesterday’s call); 3) monetization of sports betting assets, and 4) a Strip asset sale (and other non-core asset sales) all coupled with other value creating events we see taking place over the next 12-months,” said Bain in a note provided to Casino.org.