Caesars-Eldorado Merger Gets Casino Control Commission Approval

Barbara Nathan Updated on July 21, 2020

When the NJ Casino Control Commission convened from Wed., July 15 through Fri., July 17 to determine whether it would approve the proposed Caesars-Eldorado merger, its decision was far from a slam dunk. However, the meeting concluded on Fri., July 17 with a 2-0 vote in favor of the $17.3 billion deal.

The Commission’s approval was the last step still needed for the acquisition to become final. All of the other interested parties had already agreed to it.

The $17.3 billion Caesars-Eldorado merger is now finalized

On Mon., July 20, the merger of two casino corporate giants, Caesars Entertainment Corp. and Eldorado Resorts, Inc., that was over a year in the making, became final. The newly created company will retain the Caesars name. It will be known as Caesars Entertainment Inc. It will also keep the Caesars Rewards program. However, Eldorado senior management will oversee operations.

Caesars Entertainment Inc. hereby becomes the largest casino operator in the US. Besides overseeing four of the nine Atlantic City casino properties, it will own and operate 55 casinos worldwide, including casinos in 16 US states.

If Caesars and Eldorado had remained independent entities instead, Caesars would continue to operate three Atlantic City casinos–Caesars, Harrah’s, and Bally’s. (The sale of the later has not yet been finalized.) Meanwhile, Eldorado would have continued to operate just one Atlantic City casino—Tropicana. However, as a result of the merger, a single company will gain control over all four casinos.

Eldorado will also take over ownership of all of the Caesars casinos in Las Vegas. Those properties include Caesars Palace, Harrah’s Las Vegas, The LINQ, Flamingo, Cromwell, Bally’s, Paris-Las Vegas, Planet Hollywood, and Rio.  The new owner will also acquire the High Roller observation wheel,  LINQ Promenade, Forum Shops at Caesars, and Miracle Mile Shops at Planet Hollywood.

What convinced the Commission to approve the Caesars-Eldorado merger

The Commission required three days and more than 11 hours of testimony and deliberations to reach its decision.

The plan for the deal first became public knowledge over a year ago. But before it could move forward, shareholders, the Federal Trade Commission, and regulatory agencies from each state in which the merged company would operate all had to approve it.

NJ regulators expressed concern about the financial stability of the newly created company as well as the impact the merger would have on market concentration. Another area of concern related to the effects of the coronavirus on Atlantic City casino gaming and tourism and whether the timing for the merger was right.

However, Eldorado addressed those concerns sufficiently to get the Commission to reconsider. The attorney for Eldorado, Steve Schrier provided convincing testimony that the new gaming company was “well-positioned financially to absorb Caesars” and was committed to Atlantic City.

Economist Timothy Watts, managing director at National Economic Research Associates, Inc., who also testified, along with five Eldorado executives, stated that the merger would not negatively impact the Atlantic City casino market.

According to Schrier,

“Eldorado wants to be in Atlantic City, and they back that up, not just with promises but with enormous dedicated and set aside funds.”

Casino Control Commission Chairman James Plousis, who voted to agree to the merger, still expressed “legitimate concerns.” However, he was “satisfied that {Eldorado and Caesars} had met its burden of establishing, by clear and convincing evidence, that it meets each qualification standard under the Casino Control Act.”

The reaction from Caesars

 Here was what the CEO of Caesars Entertainment, Inc., Tom Reeg, had to say about the merger:

 “We are pleased to have completed this transformative merger, thus making us the premier leader in gaming and hospitality. We look forward to executing on the numerous opportunities ahead to create value for all stakeholders.

Additionally, we are pleased to welcome all of our team members to the combined company, and we look forward to implementing all of the strategic initiatives that will position the company for continued growth.”

Extensive capital improvements are part of the deal

Going forward, however, upon the recommendation of the Division of Gaming Enforcement (DGE), the Casino Control Commission stipulated numerous conditions that would need to be a binding part of the agreement.  They include the following:

  • The newly created Caesars Entertainment Inc. must make a significant capital investment in the Atlantic City casinos over the next three years amounting to a minimum of $150 million. This will include a minimum expenditure of $75 million during the first year and $125 million by the end of the second year.
  • The new Caesars must not close any properties for at least five years.

Will Bally’s remain part of Caesars?

Prior to the merger, Caesars decided to sell Bally’s Atlantic City to the Rhode Island-based company Twin River Worldwide Holdings. However, the $25 million sale is not expected to become finalized until the 4th quarter of 2020.

Meanwhile, Bally’s Atlantic City remains part of Caesars.

For now, the new company has agreed to set up a $400 million capital expenditures trust account. It plans to use the money to make substantial investments in Caesars Atlantic City, Tropicana Atlantic City, and Harrah’s Resort but not Bally’s. According to Chief Financial Officer Bret Yunker, the company would develop a multiyear plan to improve and enhance the guest experience at these three properties.

Yunker also indicated that room renovations for both the Ocean and Centurion Towers at Caesars Atlantic City and revamping the property’s food and beverage options would be a priority.

However, in the event that the sale of Bally’s is not finalized by the end of 2020, Caesars Entertainment Inc. will add another $125 million to the capital expenditures trust account. That money would presumably be earmarked specifically for Bally’s Atlantic City.

The Commission approved the creation of the $400 million trust account and appointed former state attorney general John J. Farmer to serve as trustee.

Eldorado has also agreed to reinvest 5% of its annual net revenue in its Atlantic City casino properties.

Will the new company have the same people in charge?

According to a July 20, 2020 article on PressofAtlanticCity.com, most of the senior management team from Tropicana and the old Caesars will remain in Atlantic City.

Among them are Steve Callender, senior vice president of Eastern regional operations and president of the Casino Association of New Jersey, Jason Gregoric, general manager of Tropicana, Ron Bauman, regional president for the old Caesars’ three Atlantic City casinos, and Karie Hall, general manager of Bally’s.

Tom Reeg is the new CEO of Caesars Entertainment, and Anthony Carano is the new President and COO of Caesars Entertainment. Tony Rodio, the previous Caesars CEO, will serve as Reeg’s strategic advisor. Rodio will assume the task of developing and implementing a capital expenditure program for the new company.

What about the existing deed restrictions prohibiting casino gaming at properties previously owned by Caesars?

One decision by Caesars that has received much criticism has been the deed restrictions that are still in effect at the no longer Caesars-owned Showboat, Claridge, and Atlantic Club.

Martin Perry, head of the economics department at the University of Illinois at Urbana-Champaign, representing the position of the DGE, strongly advocated for the lifting of those deed restrictions.

The DGE in turn specifically urged lifting the deed restrictions for the Showboat without mentioning the other two properties. This might have been because Bart Blatstein, its present owner, has made no secret of his desire to open a casino there.

Meanwhile, Hard Rock Hotel & Casino Atlantic City and Ocean Casino Resort also petitioned to speak before the Commission because they oppose lifting the deed restrictions. However, their petitions were denied.

The Commission concluded the hearing on Fri., July 17 without making a final ruling one way or the other. Plousis simply stated that he had “significant reservations” about removing the deed restrictions and that further discussion among the stakeholders was warranted.

Summary and conclusion: Will the Caesars-Eldorado merger be beneficial to Atlantic City?

Now that the Caesars-Eldorado merger has been finalized, many questions still remain. The fact that current Caesars Rewards and Tropicana Advantage members will not only be able to keep their benefits but receive enhanced benefits due to the two programs being linked will undoubtedly please many players.

However, for players at Bally’s Atlantic City, a lot of uncertainty still exists. depending on whether or not the pending sale of the property goes through.

It is encouraging to see that the new company seems committed to making substantial improvements to its Atlantic City properties. According to Chief Financial Officer Bret Yunker, the immediate plan to focus on these property improvements is part of a long-term strategy to get more people to want to visit Atlantic City.

“We’re going to really lean on both the Caesars database and the Eldorado database, and get the best customers we can to come to Atlantic City,” Yunker said.

Here at NJ Online Casino, we will follow all of the important new developments closely. Rest assured that we will keep you as up-to-date as possible on what the Caesars-Eldorado merger will mean to you as a player.

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