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Eldorado Resorts to sell 2 properties in preparation of Caesars deal

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July 12, 2019 By Bailey Schulz

Eldorado Resorts announced the sale of two regional properties, a move investors say will help the casino company gear up for its pending acquisition of Caesars Entertainment Corp. slated to close next year.

Reno-based Eldorado announced Thursday morning it has agreed to sell a property in Kansas City, Missouri, and one in Vicksburg, Mississippi to Rhode Island-based Twin River Worldwide Holdings Inc. for $230 million in cash.

“The sale is relatively small compared to the ($17.3 billion) acquisition of Caesars, but it does help free up some balance sheet capacity to help finance the larger acquisition,” said Union Gaming analyst John DeCree.

Impact on Caesars acquisition

The sales of Isle of Capri Casino Kansas City and Lady Luck Casino Vicksburg are expected to close early next year.

Twin River has plans to “substantially reposition” the casino in Kansas City, according to a statement from the company. It has already released renderings for concepts of how it can redevelop the riverboat casino.

“We believe these assets are a great fit for our portfolio,” Twin River President and CEO George Papanier said in a statement from the company.

The sales play into Eldorado’s strategy to cut out smaller assets; the company sold three regional properties last month for $385 million.

“The intention here is to accomplish two things,” Jefferies analyst David Katz said. “One, to focus on areas that would overlap with Caesars, and two, to pursue transactions that would reduce the profile and leverage as much as they can prior to the deal closing.”

The multibillion-dollar deal between Caesars and Eldorado would create the largest casino company by U.S. gaming assets, and the Federal Trade Commission may require the company to divest some of its properties. The sale of the Mississippi and Missouri properties likely eases FTC concerns in the Kansas City area, according to a Deutsche Bank report led by analyst Carlo Santarelli.

But even with the Twin River transaction, Eldorado would have around 60 assets after the Caesars acquisition.

Stifel analyst Brad Boyer expects Eldorado to continue to sell properties in other markets. For example, Eldorado and Caesars each own three properties in Louisiana.

An Eldorado spokeswoman declined to comment.

Katz said the two companies may also look to sell closer to home, and a Caesars property on the Las Vegas Strip could be on the chopping block.

“I don’t know which one, but it would be a lot of Las Vegas concentration … lot of concentration in Reno, the Tahoe area,” Katz said.

Twin River growth

SunTrust Robinson Humphrey analyst Barry Jonas said in a report that Twin River’s purchase is a “nice diversification move” and plays into its merger and acquisition strategy. He has previously told the Las Vegas Review-Journal that Twin River could be a potential buyer of a Caesars property on the Strip.

But such a purchase would require the company to partner with a real estate investment trust, something Twin River “has expressed some hesitancy” toward in the past, Jonas said in the report.

DeCree said he doesn’t expect Twin River to be interested in pursuing a Strip casino, but he said the company could be looking to buy more regional assets.

A spokeswoman for Twin River declined to comment.

Caesars stock fell 1.1 percent to $11.85 a share Thursday. Eldorado shares fell 3.8 percent to $45.54. Twin River shares fell 4.6 percent to $27.37.


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