Casino Merger Beats the Odds
You know when you revisit a casino; you see a new thing; you paid for it. When you see a chandelier that wasn’t there before, that was you at some point at the roulette wheel. When the bar area’s been re-carpeted, all you.
The regulars to Eldorado Resorts hotel-casinos will walk through the double-doors of their local tonight and be faced with a splash out from the house that truly takes the cake; a $17 billion Caesars Entertainment acquisition!
Eldorado has acquired Caesars for just that much, but the transaction has investors’ heads spinning. Eldorado couldn’t afford this, technically, but the eagerness of gamblers to get back on the slots after coronavirus has revived interest from capital markets to also take a chance.
The Eldorado share price doubled as investors jumped back in, and the risk-off debt market feels comfortable lending to the business as well. The Eldorado CEO, Tom Reeg, saw his break, and sold new shares and took some loans, raising enough money to complete the takeover.
We’re seeing this pattern all over the markets. There are companies that, like some investors, don’t trust these market highs and are cashing in financing now in case of a second leg-down.
It’s been an interesting post-corona flop for Eldorado, which now adopts Caesars’ name and ticker symbol. The first bettors back were the highest-wagering and most hooked, but fewer people are allowed at each table, and some swapped the casino for the stock market during lockdown (remember Hertz?). The legalization of sports-betting has also excited investors.
Tom Reeg is now CEO of the world’s new biggest casino operator, and having already got one impossible deal over the line, he seems pretty investing savvy. His next idea will be to spin-off Caesar’s online sports-betting business with its own initial public offering. He compares it to DraftKings, and investors are interested. He’ll strike while the iron is hot! Keep an eye out!
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.