The recently announced plan for a merger between Eldorado Resorts and Caesars Entertainment will bring about the biggest gaming company in the United States. Not only that, the merger will have a major impact on casinos in Atlantic City, New Jersey.
The deal is reported to be worth an estimated $17.3 million and will include stock and Eldorado assuming Caesars’ debt. However, the deal is not yet done, as the shareholders and gambling regulators still have to approve it. At earliest, the merger will not take place until the first few months of 2020.
When the merger does happen, Caesars Entertainment will have nearly 60 casino properties located in 16 states. This will make them the biggest gambling operator in the United States by a wide margin.
For the new company, the shareholders for Eldorado will have 51% and Caesars shareholders will have 49%. Tom Reeg, CEO of Eldorado Resorts, and Gary Carano, the chairman, will head the new company. If things stay as they are in Atlantic City, Caesars Entertainment will run four of nine casinos in the New Jersey gambling mecca. The company currently operates Bally’s Atlantic City, Caesars Atlantic City, and Harrah’s Resort Atlantic City.
In 2018, Eldorado took over ownership of Atlantic City’s Tropicana Casino and Resort in a $1.85 billion buyout of Tropicana Entertainment Inc.
Impact on Atlantic City casinos
There will be immediate impact in Atlantic City’s Harrah’s Resort, as Eldorado recently announced the sale of that casino and another two Harrah’s properties to VICI Properties Inc., a real estate investment trust (REIT).
When Caesars reorganized in 2015 and filed Chapter 11 bankruptcy, the company was split into two – the REIT and a separate company dealing with the operating and managing of Caesars properties. Since that time, VICI Properties has increased to currently owning 20 of the Caesars casino properties, including Caesars Palace Las Vegas.
All of Caesars Entertainment’s former properties are being leased back to the company. There will be more ramifications if the deal for VICI does not take care of various issues that come about from the ownership of 45% of all casinos in Atlantic City, which may be too big of a stake in the city’s gaming industry.
Merger awaits regulatory approval
The New Jersey Casino Control Commission still needs to approve the new merger. This decision will determine if the merger will give too much concentration of Atlantic City’s gaming market to a single operator.
Steve Sweeny is the president of the New Jersey State Senate and he voiced concerns about this issue.
“This is a significant purchase that could have a real impact on New Jersey’s gaming industry, Atlantic City’s economy and the livelihoods of casino workers and others whose jobs rely on the financial activity of the gaming sector,” he said.
“At a time when the state’s gaming business and Atlantic City’s casinos are experiencing a strong comeback, we don’t want to allow the ongoing resurgence to be compromised by a deal that concentrates too much control in a national conglomerate.
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“We should be just as concerned about the fate of individual casino workers and their families in Atlantic City as the stockholders are about their profits.
“The combined company will own 60 casino resorts across 16 states, but we need to look out for the impact on New Jersey.”
Sweeny pushed the Casino Control Commission to look deeply at the proposed merger and the impact it will have on Atlantic City.
“Gaming regulators should be sure to thoroughly evaluate the consequences of this deal,” he added.
“I will be monitoring the progress of the transaction to make sure it serves the best needs of New Jersey and our workers.”
Antitrust laws could force sales
Besides concerns for Atlantic City because of the merger, officials for both Caesars and Eldorado will probably have to deal with federal antitrust laws.
In a recent conference call with analysts and investors, Reeg conceded the company may have to sell some of its properties in order to avoid some of the antitrust concerns.
He mentioned the Las Vegas Strip and the firm’s concentration of casino ownership in that city and that the next target on the radar could be Atlantic City.
Atlantic City gamblers could benefit
The merger could be a good one for Atlantic City casino patrons. The new company will adopt the Caesars Rewards loyalty program for all of the properties. The Total Rewards program was one of the best loyalty programs the world over and in 2019 was renamed Caesars Rewards.
In February 2019, all Total Rewards members were transferred right off the bat to the Caesars Rewards program. It is assumed customers of Eldorado will be able to do this as well if the merger does happen.
The members of the Caesars Rewards program can claim various perks at the over 45 Caesars properties around the world. If the merger eventuates, the program will cover 60 properties in the United States alone.