Eldorado Resorts to Sell Two Casinos for Caesars Merger Approval

  • Federal Trade Commission told Eldorado it will have full approval once it sells two casinos
  • Twin River will buy the Montbleu Resort Casino in Lake Tahoe and Eldorado Shreveport
  • State regulators have been waiting for FTC approval before giving the deal their blessing
  • The merger was initially announced in June 2019 and planned to be completed by March 25, 2020
Eldorado neon sign
The Federal Trade Commission has given approval to the Eldorado/Caesars merger on the condition that Eldorado Resorts sells its Shreveport and Lake Tahoe casinos. [Image: Shutterstock.com]

A necessary condition

The Federal Trade Commission (FTC) will approve casino operator Eldorado Resorts’ acquisition of Caesars Entertainment once Eldorado sells two of its casinos. 

requiring Eldorado to sell the properties to avoid anti-competition issues

The FTC announced this condition in a press statement on Friday, requiring Eldorado to sell the properties to avoid anti-competition issues in their respective geographic areas after the merger. The original acquisition deal was valued at $8.5bn at the time of its announcement in June 2019.

The vote, was 3-1-1 in favor of the merger, given the divestiture condition. Commissioner Rohit Chopra voted against the deal, citing concerns about its riskiness and the complexity of the qualifying condition. Commissioner Rebecca Kelly Slaughter did not participate in the vote.

Two casinos on the chopping block

Eldorado has been told to sell the Montbleu Resort Casino & Spa in the South Lake Tahoe area of Nevada and its namesake Eldorado Resort Casino in Bossier City-Shreveport, Louisiana. Twin River Worldwide Holdings has already made a deal to purchase both of these properties. 

Eldorado had also previously committed to selling its Isle of Capri casino in Kansas City, Missouri as part of the merger. State regulators in New Jersey and Nevada have been waiting for FTC approval before giving the green light to the deal.

Financing in place

In advance of FTC approval, Eldorado recently unveiled plans to issue new shares and sell some of its real estate in Las Vegas to raise funds for the merger. The net proceeds after expenses from the 18 million additional shares of common stock will be approximately around $672m. 

Eldorado is also getting a $400m loan from the Caesars Entertainment-affiliated real estate investment trust VICI Properties. From a combination of share sales and real estate transactions, Eldorado looks to raise about $1.2bn.

A lengthy merger process

Since the announcement of the merger between Eldorado and Caesars a year ago, there have been a number of stumbling blocks.  

Four Eldorado Resorts executives, including CEO Tom Reeg, were embroiled in a scandal in September 2019, during which an investigation into “questionable trading activity” was launched by the US Securities and Exchange Commission (SEC). It was feared that the investigation could sink the merger. 

shutdown of casinos across the US also raised fears that the merger might fall through

The initial deadline for the merger to be completed was March 25, 2020. Because this deadline has passed, Eldorado must pay Caesars $0.10 per share for every month of delay. The coronavirus pandemic and the resulting shutdown of casinos across the US also raised fears that the merger might fall through. If this happens, Eldorado would face a penalty of $836.8m.