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Eldorado: Green light for Caesars merger

It has been known for several months that that the Eldorado Resorts want to take over their competitor Caesars Entertainment. The US Federal Trade Commission approved this deal a few weeks ago, and now the companies have been able to get another "okay". This came from the Nevada Gaming Control Board, i.e. the gaming authority of the state of Nevada. Now the deal just has to clear a few hurdles before it can go through.

Das Caesars Palace in Las Vegas in der Nacht.

Caeasars Palace is Caesars Entertainment Group's most well-known resort on the Strip in Las Vegas - and could soon be owned by Eldorado Resorts pass over(©Mariamichelle/Pixabay)

Nevada Gaming Control Board Agrees Deal

Good news for the Eldorado Resorts and Caesars Entertainment. It has been clear for several months that both companies want to merge in the future. Both companies had already obtained the approval of the US Federal Trade Commission for this step. Now the Nevada gaming authority, the Nevada Gaming Control Board, has given its approval. In this context, the value of the takeover is estimated at around 17.3 billion US dollars. If the other hurdles are now taken,after the merger of the two giants, the largest gambling company in the United States should be formed. Around 60 locations would then be found on the map of the combined group, spread over 16 states.

A name for the new group has already been found. Under the name“Caesars Entertainment Inc.” it is to be launched. This would then be responsible for a whole series of prominent companies in the country. Caesars Entertainment has eight properties on the Strip in Las Vegas alone. These include the world-famous Caesars Palace, but also the no less prominent Flamingo Las Vegas, Planet Hollywood or Harrah's Las Vegas.

Annual cost savings of $500 million?

Pending only two approvals for the deal to be confirmed. One from the state of Indiana and the other from the state of New Jersey. However, these approvals are considered to be purely a “formal matter”. For Eldorado, this is slowly but surely beginning the hot phase of the deal. Both sides had already agreed in June last year that Eldorado could acquire Caesars shares at a price of US$12.75 per share. Following this, thenew group should then be traded on the NASDAQ.

In terms of personnel, important decisions have already been made in this context. CEO of the new company will be Tom Reeg, previously known as CEO of Eldorado Resorts. Reeg explains that the main purpose of the merger is to optimize processes. Aresponsible capital structure should be established to increase value for all shareholders, according to the incoming CEO. However, fewer jobs are inevitably required for this, as is usually the case with a merger. The companies make no secret that this is also the case here. Around 1,000 employees will probably have to be laid off.

Eldorado Resorts: Deal must turn out to be good business

It is a little surprising that the plans for the takeover have not changed again due to the Corona crisis. The pandemic is hitting the USA extremely hard and has not stopped at the gaming industry either. On the contrary. Due to the closures caused by the lockdowngambling companies have experienced a sharp decline in recent months. According to US media, the debts that the Eldorado Resorts have accumulated as a result of the crisis should amount to around three billion US dollars. In addition, there will probably be a takeover price of a little more than 17 billion US dollars in the near future. Makes a total ofOver $20 billion in debt. In other words, the deal almost has to prove a good deal for Eldorado Resorts. Otherwise there is a risk of bankruptcy. Or the own takeover by a competitor.

In addition to the costs for this debt, the Eldorado Resort will face other costs as part of the takeover. The business will initially be operated as a leasing business. For Eldorado, this means that a total of around twelve billion US dollars will be incurred for the leasing costs. These horrendous sums must first be generated. And there is no guarantee of that even after the pandemic is over, and nobody knows when that will be. In order to at least reduce the mountain of debt a little, the companies are planning to sell off three resorts.Two casinos in Indiana would like to be sold, as well as a resort on the Strip in Las Vegas. This will not be enough for the entire mountain of debt, but a first step would have been taken.

US gaming industry vulnerable to takeovers?

Although the takeover in this case was announced long before the Corona crisis, it could significantly increase the chances of takeovers in the gaming industry . But not only here, but also in other US industries.Companies with low capital reserves are currently struggling with massive economic problems. This benefits the companies, who can draw on significantly larger reserves economically. However, many experts also estimate that companies will initially hold back on their takeovers, at least during this time. After all, it is not yet entirely clear how long the corona crisis will continue to have the United States under control. The United States is the country hardest hit by the virus in the world, ahead of the outbreak country China.

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The article was published on July 20th, 2020 in the Fraustest.com magazine under the keywords, ,,, , released.
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