Iconic Casino Company Soars As It Closes In On Merger With Rival
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MICHAEL LARKIN6/07/2019
Caesars Entertainment (CZR) stock gapped up on reports it is close to securing a merger deal with rival Eldorado Resorts (ERI). Casino stocks as a whole were also broadly up.
Activist investor Carl Icahn has been pushing for a sale since building a sizable stake in Caesars, which is now said to be close to 29%. His efforts have seen him win three board seats, and he now seems close to total victory.
Sources told the Wall Street Journal that Caesars and Eldorado are close to finalizing a cash-and-stock deal, and that it could be announced later this month. It comes just a day after the New York Post reported Caesars and Icahn agreed to reject an "underwhelming" bid from the gaming company. If the deal does come off, Eldorado management is expected to take charge of the combined company.
Caesars Entertainment stock was up 3.8% at 9.48 on the stock market today. The stock holds a poor IBD Composite Rating of 38. VICI Properties (VICI), which took most of Caesars' properties following its bankruptcy restructuring, was down 1.6%. Eldorado stock was up 4.6%, and it holds a much healthier 86 Composite Rating.
Among other casino stocks Wynn Resorts (WYNN) rose about 1%, Las Vegas Sands (LVS) added 2.7% while MGM Resorts (MGM) dipped 0.85.
David Close To Beating Goliath
It will be something of a David vs. Goliath moment, as Caesars is a giant of the industry, with around 50 casinos in 13 states and five countries. The jewel in its crown is the famed Caesars Palace.
Eldorado is a relative minnow, with its 25 properties primarily located outside of Las Vegas. Its market value of around $4 billion is a third smaller than Caesar's $6 billion. However troubled Caesars is also saddled with around $9 billion in long-term debt.
Sources told the WSJ that additional debt would have to be taken on by Eldorado or the combined company to get the deal over the line.
A number of gaming industry rivals have looked at merging with Caesars. Boyd Gaming (BYD) is said to be still weighing up the prospects, but insiders said the odds are slim it will win out.
"Billion Dollar Buyer" star Tilman Fertitta also looked into combining the firm with his Golden Nugget chain; however the Caesars board was said to be concerned the reverse merger would leave its firm saddled with too much debt.
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