A $17.3 billion buyout has created the world’s largest casino company, after the deal was approved last Friday. On July 17, New Jersey gaming regulators issued approval for the merger Eldorado Resorts Inc. and Caesars Entertainment Corp. Now officials are examining the potential impacts of the deal, and how it could affect gaming in Atlantic City in the near future. The decision came after a 2-0 vote from the Casino Control Commission, and
the result means that the new gaming company will have control over four Atlantic City casinos. The significance of the merger has not caused quite the stir, and questions still remain about whether or not the deal can be successful under the lingering concerns associated with the COVID-19 pandemic and the new safety restrictions that have been put in place. Officials are also questioning how competition within the industry will be impacted now that four of the nine casinos in Atlantic City are owned and operated by a single company.
Unveiling the New Caesars
Eldorado Resorts Inc. is a Nevada-based company that traces its roots back to a single family-owned casino and hotel that was established in 1973 in Reno, Nevada. Since then, the company has risen to become one of the industry’s leading gaming companies, boasting 52 properties across 16 states, including some of the nation’s most recognizable casinos like Caesars Palace, Paris Las Vegas, Planet Hollywood, Flamingo, and Linq. Eldorado now plans to buy Caesars stock, as they look to form what is now being referred to as “new Caesars.”
Eldorado CEO Thomas Reeg shared that Billionaire investor Carl Icahn will be the largest shareholder of the new company, after Icahn acquired a significant amount of Caesars shares when the company went through bankruptcy protection in late 2017. Icahn will now own more than 10 percent of new Caesars. Eldorado’s goal to buy Caesars stock will leave them with 56 percent of the merged company, which will continue operating and trading under the name Caesars Entertainment Inc. The company will immediately be in control of the Caesars Palace Atlantic City, Bally’s Casino, Harrah’s Casino, and the Tropicana. The merger, of course, affects Caesars properties outside of Atlantic city, including casinos in the United Kingdom, Egypt, Canada, and even a golf course in Macau. Reeg, who will head the new Caesars initiative, has emphasized his intentions to focus the company’s resources on U.S. gambling operations.
Financial Implications
Two days before the vote took place, the Casino Control Commission heard testimony about how the new merger could directly impact Atlantic City. The greatest concerns focused on the financial aspect of the merger, particularly how competition would be affected if a single company was given control over four casinos in the Atlantic City market, while also dealing with the financial impact the coronavirus pandemic has caused. After hearing the testimony, Commissioner Alisa Cooper stated, “The stakes could not be any higher.”
In an effort to address some of these concerns, Bally’s Atlantic City hotel-casino is being sold for $25 million. The deal comes after Rhode Island-based Twin River Worldwide Holdings agreed to make the purchase. The sale addresses new Caesars’ impact on the competitive gaming market in Atlantic City, while also mitigating other lingering financial issues. Eldorado has promised not to close the three other properties for at least five years, and they plan to spend $400 million to help improve these locations in the next three years. After that money is spent, new Caesars will reinvest 5 percent of the annual revenue generated from these locations.
In a last-ditch effort, Hard Rock Atlantic City and the Ocean Casino Resort requested to comment to the commission before the vote went through for the merger. The request was denied by the commission, on the ground that it came too late in the process. The commission had already worked with consultants on ensuring that the new Caesar’s met regulatory requirements to preserve competition and parity in the industry; the sale of Bally’s being one of the conditions fulfilled to ensure this.
In the coming years, new Caesars will see whether or not their investment plan will be enough to keep the remaining three casinos prospering. If the plan falls short of being profitable, the recently formed gaming behemoth may turn its focus to develop gaming elsewhere within the United States.