Finally, the most-anticipated merger in the gaming industry is one step closer to becoming reality. The two companies have confirmed the deal back in June, but many industry experts believed that shareholders of both enterprises would be reluctant to accept such a sudden and large-scale shake-up. It turns out that the opposite of the general consensus turned out to be true, as stakeholder meetings took place on Monday.
Eldorado Resorts Inc. and Caesars Entertainment Corp. have confirmed that shareholders of both companies approved the proposed merger, leaving only bureaucratic obligations as the only obstacle before this joining of forces. While preparing for this move required Eldorado to offload its Rio Hotel and Casino for $517 million, the eventual merger will require even more sacrifices that may or may not prove to be fruitful.
The Biggest Merger in the History of Gaming
In theory, this move was viewed as a way for the new conglomerate to “inherit” all the best traits of both brands, but it turned out to be completely different. In reality, Eldorado is to pay a total of $7.2 billion and around 77 million common shares to acquire Caesars. The purchase, however, will only be for a majority stake in the company and the exact percentage hasn’t been revealed to the public yet. Why is “majority stake” the key term here, then? Well, it allows Caesars to retain its name, which was a top priority for this global brand, according to sources.
As a result, Eldorado will officially acquire Caesars after the merger is cleared and passes through all the necessary regulatory reviews. In turn, Caesars, from a branding standpoint, will effectively absorb Eldorado to create a single entity in terms of market presence. This is indeed confusing, but it takes a closer look to properly understand what Caesars and Eldorado have been devising behind closed doors.
Eldorado is indubitably one of the most esteemed gaming companies on the entire North American continent. While they serve customers in each of their 26 venues across the States, they lack the presence that Caesars has. They are indeed financially successful, mainly due to the popularity of casinos such as Circus Circus Reno and Tropicana Atlantic City. However, they are falling behind in terms of brand awareness when it comes to competing with operators such as MGM and Caesars.
Thus, it can be said that Eldorado will be entitled to a “larger auditorium” when it comes to marketing their service. While some may deem this move a wise one from Eldorado’s standpoint, it becomes pure genius as far as Caesars Entertainment Corp. is concerned. In 2018, their shares dropped by as much as 30%. Bad investments, increasing liabilities and a lack of demand all contributed to this financial conundrum they found themselves in. That’s where Eldorado steps in.
Upon the completion of the merger, Eldorado is set to take on the entirety of its former rival’s gargantuan debt. Not only will this move allow Caesars to get a much needed monetary injection, but they will also get a chance to tackle dwindling customer demand. They currently hold more than 50 properties across the entire country. With an addition of 26 gaming venues, the horizons will be visibly broadened, which is projected to give Caesars a “second chance” in the form of a massive growth opportunity.
According to current projections, the merger is set to become official in June 2020. This relatively long wait is the result of a multitude of federal requirements that have to be fulfilled when two companies are attempting to conduct a merger. Of course, the sheer magnitude and historical significance of this move will result in a period of intense scrutiny at the hands of legislators, customers and industry executives.
As for future projects, there haven’t been any leaks whatsoever. With MGM and Mohegan looking to expand in a more international direction, it’s safe to say that this Eldorado-Caesars amalgamation will strive for the same things as well. Once the entire process is consolidated in the upcoming months, there will surely be a profusion of rumors about potential projects. Stay tuned, as we’ll strive to update you about any new developments in this story.