Caesars Buys Wynn’s Michigan iGaming Ops, Q4 Earnings Miss

Posted on: February 20, 2024, 05:32h. 

Last updated on: February 21, 2024, 10:57h.

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

Caesars Entertainment (NASDAQ: CZR) said Tuesday it’s acquiring Wynn Resorts’ (NASDAQ: WYNN) Michigan iGaming operating rights, bolstering the buyer’s internet casino footprint in one of the six states that permit that activity.

Caesars Entertainment
Caesars Palace Las Vegas. The operator’s Q4 earnings were disappointing, but it’s buying Wynn’s Michigan iGaming operation. (Image: Caesars Entertainment)

Financial terms of the transaction, which was announced in conjunction with Caesars’ fourth-quarter earnings, weren’t disclosed. It was revealed a week after Wynn’s interactive unit sold its New York sports betting license to Penn Entertainment for $25 million.

WynnBet’s Michigan sports betting operations weren’t mentioned in a statement released by Caesars, but it’s likely that unit is on borrowed time. Caesars will partner with the Sault Ste. Marie Tribe of Chippewa Indians, previously Wynn’s Michigan partner. The tribe runs five land-based casinos located throughout the Upper Peninsula of Michigan.

Wynn and Caesars will receive non-cash consideration, including extinguishment, reductions, and assignment of certain contractual obligations related to both parties’ businesses,” according to the statement.

The buyer said it will transition the existing WynnBet platform in Michigan to one of the Caesars brands later this year.

WynnBet Essentially Dead

With the news that it’s leaving the Michigan iGaming market, WynnBet is now all but dead. Over about three weeks, the operator announced it will halt its mobile sports betting business in Massachusetts, sold its New York license to Penn, and today revealed the Michigan transaction with Caesars.

That means that Wynn will soon only operate retail sportsbooks at its Las Vegas Strip casino hotels and Encore Boston Harbor. All of that is to say a unit that was once believed to be worth anywhere from $500 million to north of $3 billion has proven to be worth far less from those numbers for Wynn.

As for Caesars, assuming the Michigan price point is low, it could be getting a good deal and an effective avenue for adding more customers in the fast-growing iGaming space.

The Harrah’s operator said its online wagering business posted fourth-quarter earnings before interest, taxes, depreciation, and amortization (EBITDA) of $29 million, compared with a year-earlier loss of $5 million.

Speaking of Caesars’ Earnings …

Shares of the Horseshoe operator fell in extended trading Tuesday after the gaming company reported a fourth-quarter loss of 34 cents a share on revenue of $2.83 billion. Analysts expected a loss of 11 cents on sales of $2.86 billion. Same-store adjusted EBITDA of $930 million was $19 below the year-earlier figure.

One of the bright spots was more evidence supporting Caesars’ debt-reduction efforts. The operator concluded 2023 with $12.4 billion in liabilities, which was down from the end of the prior year. It had $1 billion in cash on hand, not including $138 million in restricted cash.

“Since the Caesars merger closed in the third quarter of 2020, we have permanently repaid over $3.0 billion in debt and we look forward to another year of strong debt reduction in 2024. We ended the quarter with total net leverage as calculated under our bank credit facility of 3.9x as of December 31, 2023,” said CFO Bret Yunker in the statement.