In late June, two of the biggest casino companies in the United States agreed to merge. It was the largest partnership between gambling operators in US history. Now, news is coming out that the Eldorado-Caesars merge is taking longer than expected.
It’s not entirely surprising. Many steps still need to be taken before this massive deal can officially go through. Today, we’re looking at the details of this historic merge and discussing why it’s being delayed.
Eldorado Unlikely to Sell Las Vegas Strip Properties Anytime Soon
The merger between these two companies has been rumored for years. Eldorado Resorts and Caesars Entertainment are two of the biggest gambling operators in the United States. Finally, in June, company officials announced they had officially agreed to merge.
Of course, a deal of this magnitude can’t be made in a day. Many steps need to be taken first, including getting approval from state gambling commissions and selling properties. Initially, hope was that the deal would be done by July.
Many anticipated that Eldorado and Caesars would begin selling some of their major casinos. Caesars operates a number of the top casinos on the Las Vegas Strip. In early July, Tom Reeg, CEO of Eldorado Resorts, told the media that he expected Caesars to sell some of its Strip properties.
Now, Reeg believes that Caesars will not sell a Strip property anytime soon. He recently told the media that a major sale is unlikely until after the Eldorado-Caesars merge is complete. Unfortunately, this partnership is being delayed.
Eldorado-Caesars Merge is Taking Longer Than Expected
In a recent second-quarter conference call for Eldorado Resorts, Tom Reeg told the media that investors can expect this merge to complete closer to January 1st of 2020. Initially, Reeg expected the deal to be finished by this summer. He commented on some of the reasons for this delay.
Eldorado Resorts is reaching out to state gambling commissions. It’s also talking with the Federal Trade Commission to see which properties need to be sold. Based on all reports, at least one casino on the Strip will be sold.
Officials in Eldorado Resorts have not commented on which property will be sold. Tom Reeg has confirmed that casino operators located off the Las Vegas Strip have expressed interest in purchasing a property. Tilman Fertitta, who owns the Golden Nugget Casino, has told the media he’s interested in buying a Strip property.
Eldorado has failed to meet analysts revenue projections in 2019’s second quarter. For the second three months of the year, this company earned $637.1 million, a 39.5% increase from the same time period in 2018. Interestingly, net revenue fell by 48.7% to just $18.9 million. Reed claims “a lot of headwinds in the quarter,” as the reason for this revenue drop.
Revenue Dips at Eldorado Resorts is Cause for Concern
When the Eldorado-Caesars merge was announced, Tom Reeg told the media he expects the company to generate revenue synergies of $500 million a year with a $4.5 billion cash flow. The company’s recent revenue decline has led some analysts to question how legitimate this claim is.
Eldorado claims it anticipated revenue dips at its Black Hawk, Colorado properties. The casinos here have undergone major construction projects that have limited the number of gambling options. Major floods in the Midwest have also limited access to Eldorado casinos in Iowa, Missouri, and Mississippi.
The rise of online casino gambling in the US may also be a reason for the revenue dips. Many people are now choosing to make their casino bets online. Some states, including New Jersey, have even begun regulating online casino gambling.
It’s clear that the Eldorado-Caesars merge is not happening anytime soon. Based on what Reeg is saying, it’s likely to be finalized by the end of the year. Make sure to stay tuned for updates over the next few months!