Eldorado-Caesars Merger of the Century Moving Full-Steam Ahead

It’s now been two years since Eldorado Resorts Inc. and Caesars Entertainment Corp disclosed their plan to join forces and create a $17.3 billion gaming conglomerate, the largest gaming brand the world has ever seen. Earlier in the year, Eldorado and Caesars had anticipated closing their merger acquisition deal by mid-April. But come March, when the COVID-19 pandemic was starting to tear the brick and mortar gaming world apart, a lot of doubt was cast on whether this deal would materialize, and true to the scepticisms, it didn’t happen.

Nonetheless, while the pandemic has led to a lot of delays in the progress of this merger, the novel virus doesn’t seem to be a threat enough to snuff out the multi-billion dollar casino dream.

Timeline Holdups

In May, the realization of this merger was rescheduled for an end of June completion date by the company executives. However, due to the same pandemic related roadblocks, that’s highly unlikely given that there are only two weeks left to the deadline and the deal is yet to get the four remaining regulatory signatures it requires to proceed, after getting approval in more than a dozen states.

Before this merger acquisition is formally approved, the company has to get a thumbs up from the FTC (Federal Trade Commission) and then secure the blessings of the gaming governing bodies in Indiana, Nevada, and New Jersey as well. The New Jersey Casino Control Commission (CCC) and the Nevada Gaming Control Board (NGCB) had their individual state regulatory meetings about a week ago, but the biggest industry takeover wasn’t part of the agenda on both occasions. All meetings to discuss this deal were to be held back in March but they ended up being postponed or canceled due to the COVID-19 crisis.

For Indiana on the other hand, heads under the Indiana Gaming Commission (IGC) and the Indiana Horse Racing Commission (IHRC) have reportedly started looking into the matter this month, but there are no reports of the progress they have made.

On the bright side, however, sources close to the matter indicate that there’s a chance the FTC will complete its review of the transaction and okay it as soon as this week, or at least before the end of June. Once the FTC greenlights the deal, industry experts agree that New Jersey, Nevada, and Indiana will be nudged to seal the deal faster.  Whichever way it goes, executives from the two companies are confident that the merger acquisition deal will be completed in 2020.

Liquidity Questions

Despite the turbulence that 2020 has taken us through so far, other key players in this transaction apart from company executives are confident that the merger will pull through. Yes, both companies have suffered through a significant revenue decline in Q1 2020, but the losses are a very small piece of the puzzle.

By May, the revenue of Caesars had dipped by over 13% to $1.83 billion, reporting a 47% decline of its adjusted earnings to $299 million and a loss of $66 million. Likewise, Eldorado also reported a 25.6% revenue dip to $473 million with operating losses nearly identical to operating profits at $123.3 million and $123.6 million respectively. But that’s only one side of the coin.

On the flip side, sources indicate that both gaming brands have the liquidity that could last them for more than one year. Caesars’ balance sheet spots a $3 billion cash reserve, and after selling the Rio, one of its Sin City properties for $460 million, there’s more money on the table, which hadn’t even been factored in into this merger acquisition. For Eldorado, the company could end up having about $850 million at hand should its $230 million asset sale of its two casino properties in Missouri and Mississippi to Two Rivers close within the next two months. 

Daily Ticking Fee

Meanwhile, Eldorado continues to pay an accruing daily ticking fee of $2.3 million to Caesars’ stakeholders. Should the deal close in late June, the price tag of the transaction will rise to $17.5 billion from $17.3 billion. Nevertheless, this increase is insignificant if you consider the size of the deal itself and the advantage that both companies will have when the arrangement comes to fruition.

Moreover, executives from both companies have reiterated their intention to stamp the merger as is, given that any new adjustments would call for a shareholder vote and a new financing campaign. This would only cause more delays, yet they’ve already procured attractive financing commitments with no debt maturities until 2024 from 11 banks.