Caesars Entertainment has been looking for a deal. The problem is it doesn’t want just any deal.
That is why it is interesting to learn that another New Jersey casino owner, Eldorado Resorts, and Caesars are in discussions to become one giant gaming enterprise.
According to exclusive reporting from Reuters, the two companies are in the beginning stages of talks about how a joint venture would look.
Caesars and Eldorado exploring a merger
There is not a formal offer on the table, and there is not even a promise of one. However, it seems as if the talks are serious.
Caesars has a market capitalization of $5.4 billion and Eldorado Resorts of $3.6 billion.
While impressive, it still pales in comparison to other big casino companies, namely:
- Las Vegas Sands ($46.5 billion)
- Wynn Resorts ($12.5 billion)
- MGM Resorts International ($14 billion)
It’s worth noting that Caesars emerged from bankruptcy in 2017. It could not overcome its massive debt and has been struggling to regain its market share.
A merger will, however, level the playing field some.
“The universe of buyers (for Caesars) is limited, and Eldorado is best suited to extract full value from Caesars’ assets in our view,” Roch Capital Partners analysts wrote in a March 6 research note.
According to a source close to the discussion, Caesars has shared some confidential financial information to Eldorado.
How a Caesars-Eldorado deal impacts New Jersey
Caesars Entertainment owns 53 properties with three Atlantic City casinos in its portfolio:
Eldorado Resorts owns and operates 26 properties, having just taken ownership of Tropicana in the fall of 2018.
A merger will put four of nine Atlantic City casinos under one roof. One company in control of nearly half of the casinos on the Boardwalk can be cause for celebration or concern.
Joint marketing efforts can parlay into more visitors. However, a relative monopoly might translate into fewer promotions for customers.
It’s also important to note that both companies host multiple NJ online casinos.
What implications such a mega-merger would have on the gambling operations of both companies is unclear. But some questions to consider include:
- Will the new company leverage all four casino brands in AC?
- Will the company sell a casino or casinos?
- Will it continue to use multiple online platform partners?
- Or will it decide to shutter an online operator or two?
Caesars has been a hot commodity lately
More recently, Carl Icahn has been acquiring shares of the global gaming company. The billionaire investor now owns 20.88 percent of Caesars. He has also been pushing the company to sell itself.
As the single largest shareholder in the company, Caesars is listening and recently rewarded him with three board seats.
He also has a say in the selection of its next chief executive officer. Mark Frissora, Caesars Entertainment’s current CEO, is scheduled to step down in April.
Icahn is in favor of the merger. It’s ironic (or is it?) that just last year, Icahn sold Tropicana to Eldorado.
In a statement, Icahn said:
“The best path forward for Caesars requires a thorough strategic process to sell or merge the company to further develop its already strong regional presence.”
These are the early stages of talks between the two companies and negotiations have not even begun. Knowing that, it is hard to tell if the merger will come to fruition. And where, in the end, that will leave the NJ casino market.