Eldorado Rakes in Caesars for $17 Billion

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In a deal that surprised no one, Eldorado Resorts Inc. (NYSEARCA: ERI) and Caesars Entertainment Corp. (NASDAQ: CZR) on Monday morning announced a definitive merger agreement under which Eldorado will pay $7.2 billion in cash and stock and assume $10.1 billion in Caesars’ outstanding debt. The cash-and-stock portion of the deal includes $8.40 per share of Caesars stock plus 0.899 shares of Eldorado stock with a total per share value of $12.50.

Earlier this month, Caesars reportedly rejected an offer from Eldorado valued at $10.50 a share. Activist investor Carl Icahn, who owns approximately 18% of Caesars, and who agreed to reject the earlier offer, supported the offer announced Monday morning. Icahn has been pushing for a sale or merger deal for Caesars since boosting his stake in the company early this year. In April, Icahn forced the ouster of former Caesars CEO Mark Frissora, replacing him with long-time gambling and casino executive Tony Rodio. Last October, Caesars rejected a merger at $13 a share with Golden Nugget owner Tilman Fertitta.

Eldorado acquires no new debt in the transaction. The cash portion of the deal will include the issuance of about 77 million shares of stock and sale and new lease agreements valued at $3.2 billion with Vici Properties Inc. (NYSE: VICI). The properties include Harrah’s New Orleans, Harrah’s Laughlin and Harrah’s Atlantic City, sold to Vici for $1.8 billion. These properties will be leased to the merged company under Vici’s existing master lease agreement for Caesars’ non-Caesars Palace Las Vegas properties. Under the master lease agreement for the Las Vegas Caesars Palace and Harrah’s properties, the merged company will make higher rent payments.

The merger requires the approval of stockholders of both companies, applicable gaming authorities, compliance with the Hart-Scott-Rodino requirements and other customary closing conditions. The two companies expect the deal to be completed in the first half of next year.

Once the deal is completed, current Eldorado shareholders will own 51% of the merged company and Caesars shareholders will own the remaining 49%. The company will retain Caesars’ name, Nasdaq listing and stock ticker symbol.

Caesars shares traded up more than 12% in Monday’s premarket session, at $11.23 in a 52-week range of $5.84 to $11.90.

Eldorado’s stock traded down nearly 7% to $47.67, in a 52-week range of $31.86 to $54.99. The stock’s 12-month price target was $57.33 as of Friday’s close. The good news about no new debt is offset by a doubling of the number of shares outstanding.


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