While both casino conglomerates remain tight-lipped about internal discussions, Reuters is reporting that Caesars Entertainment and Eldorado Resorts are currently engaged in discussions about a potential merger.
In an exclusive report published on March 17, Reuters reporter Greg Roumeliotis asserts that “people familiar with the matter” have told him that the Las Vegas-based Caesars Entertainment and the Reno-based Eldorado Resorts have entered the “early stages of exploring a merger.”
Roumeliotis was unable to get either casino corporation to offer any official comments on the matter, but reputable news outlets such as CNBC have followed up by confirming the Reuters report.
Billionaire Corporate Raider Spearheading Merger Talks
Both news services link the merger talks to billionaire investor Carl Ichan, after the 83-year old hedge fund guru made waves in the gaming industry by upping his stake in Caesars Entertainment from 15.53 percent to 17.75 percent.
Under the auspices of Icahn-owned firms High River Limited Partnership, Icahn Partners LP and Icahn Partners Master Fund LP, the corporate raider spent $126.7 million to acquire an additional 15 million shares of Caesars Entertainment stock at a price of $8.45 per share.
That acquisition – revealed as part of a U.S. Securities and Exchange Commission (SEC) filing – was finalized on March 11, three days after Icahn increased his stake in Caesars Entertainment from 10 percent to 15.53 percent.
As part of his efforts to consolidate control of the company, Icahn successfully compelled the Caesars Entertainment board of directors to add three of his close allies – Icahn Enterprises chief executive officer Keith Cozza, Icahn Enterprises board member James Nelson, and Icahn Capital fund manager Courtney Mather.
Icahn’s power play comes on the heels of Caesars Entertainment chief executive officer Mark Frissora’s ouster, after the latter announced his intention to step down this April late last year. Frissora assumed the CEO role in 2015, shortly after the company entered Chapter 11 bankruptcy proceedings, and shares of Caesars Entertainment stock fell by 20 percent during his tenure.
Debt May be Compelling Caesars, Eldorado to Come Together
Reflecting the company’s 2015 bankruptcy filing, Caesars Entertainment remained $9.1 billion in debt by the end of December – despite a $5.4 billion valuation.
Eldorado Resorts – a Reno-based company operating 26 casino properties throughout 12 states – holds a market valuation of $3.6 billion offset by $3.3 billion in debt.
Despite the success of its Harrah’s and Horseshoe casino brands – along with 53 properties in 14 state and five foreign countries – Caesars Entertainment failed to cope with a $25 million debt burden before successfully navigating bankruptcy.
The advent of legal sports betting on a statewide basis – which Caesars has taken advantage of in New Jersey and Mississippi has helped the company regain its financial footing.
The combination of Caesars and Eldorado would create a more formidable competitor to larger Wynn Resorts Ltd. and MGM Resorts International.
In a research note to investors dated March 6, analysts for Roch Capital Partners wrote about Eldorado’s unique status as a prospective Caesars buyer:
“The universe of buyers (for Caesars) is limited, and Eldorado is best suited to extract full value from Caesars’ assets in our view.”
As reported by the New York Post, Caesars has already provided Eldorado executives with limited access to its internal books and other financial data.
Icahn is believed to have interest in directly appointing Caesars’ next CEO, with Anthony Rodio – current CEO of Affinity Gaming – said to be his preferred candidate.
Rodio previously served as CEO of Tropicana Entertainment Inc., a casino conglomerate which Icahn helped sell to Eldorado Resorts for $1.85 billion last year.