High Stakes for Eldorado and Caesars
The two biggest players in Vegas are being cut down to size.
Caesars Entertainment is giving up one of its Atlantic Bay casinos for a much-needed injection of cash, and Eldorado Resorts is going through the same process with namesake funhouses in Louisiana and Lake Tahoe. These are painful sacrafices, imagine having to sell a limb to survive!
What’s most striking about these casino fire sales are the prices. There seems to be a vast dislocation between price and value. In pre-corona January, Eldorado’s casinos were valued at over $400 million. We’re now only four months down the road, and they’re practically being given away for $155 million. There has to be an explanation!
On the 24th June 2019, Eldorado and Caesars agreed to merge. It wasn’t a simple deal. It involved 17-billion-dollars in financing from eleven banks, touch and go regulatory approval at both state and federal level, and the billionaire activist investor, Carl Icahn.
He says he “looks forward to seeing his investment prosper”, where because of the great synergies, “one plus one equals five.” It’s a big money merger at a cash-strapped time, but they can’t let Icahn down. The casinos are being sold to buy them time.
Instead of Eldorado haircutting its hefty purchase price, or one company escaping through a loophole in the paperwork, they’re just going to delay the merger until June. They have enough liquidity to last a year from now, at which point a day of reckoning will come for investors.
Will the public have come rushing back to play the slot machines?