Eldorado Finalizes Isle of Capri, Lady Luck Sales to Twin River, Appeasing FTC

Posted on: July 2, 2020, 09:50h. 

Last updated on: July 2, 2020, 02:54h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Eldorado Resorts (NASDAQ: ERI) wrapped up sales of the Isle of Capri Casino in Kansas City, Mo. and Lady Luck Casino in Vicksburg, Miss. to Twin River Worldwide Holdings (NYSE:TRWH), allaying regulators’ concerns about concentration risk in Missouri.

Eldorado Sale of Isle Of Capri Riverboat
Eldorado wrapped up the sale of the Isle of Capri Kansas City, seen here, allaying regulators’ concerns about competitive risk in Missouri. (Image: Twitter)

Last week, the Federal Trade Commission (FTC) approved Eldorado’s $17.3 billion takeover of Caesars Entertainment (NASDAQ:CZR). But the commission explicitly said it’s aiming to “prevent competitive harm in Kansas City, Missouri,” where ERI and Caesars run gaming venues.

The commission acknowledged ERI’s pending deal with TRWH, noting that if the transaction didn’t reach the finish line, it could compel Eldorado to find another approved buyer for the Isle of Capri in the next 12 months.

Rhode Island-based Twin River is paying $230 million for the Missouri gaming property and the Lady Luck Casino. It took roughly a year to complete those acquisitions.

Debt-Reducing Effort

Eldorado is taking on $8.8 billion in debt to create the largest domestic gaming company –- a number that concerns some analysts because it could hinder the buyer’s ability to quickly generate free cash flow immediately after bringing Caesars into the fold.

ERI is seeking to allay those worries, in part by announcing an array of asset sales, including the Isle of Capri and Lady Luck, since it revealed its offer for Caesars in June 2019.

The sale of these two assets is consistent with our continued focus on reducing debt ahead of the expected closing for the Caesars transaction,” said Eldorado CEO Tom Reeg in a statement.

The FTC also wants ERI to lighten its portfolio in the South Lake Tahoe region of Nevada and the Bossier City-Shreveport area of Louisiana –- a request the operator is complying with by selling the Eldorado Shreveport Resort and Casino and MontBleu Resort Casino in Lake Tahoe to TRWH for $155 million. As part of that deal, TRWH is also buying Bally’s Atlantic City from Caesars for $25 million.

Benefits for TRWH

Analysts are enthusiastic regarding TRWH’s purchases of the Isle of Capri and Lady Luck, noting those buys aid in the company’s quest for geographic diversification and should improve the operator’s earnings before interest, taxes, depreciation and amortization (EBITDA) going forward.

The company runs Rhode Island’s two casinos — venues that account for the bulk of its revenue and EBITDA. But the New England market is increasingly competitive, prompting Wall Street’s desire to see TRWH add assets in other parts of the country.

Twin River President and CEO George Papanier said the company sees “the opportunity to increase the net cash flow from these properties with our redevelopment and operating plans.”

Isle of Capri has 40,000 square feet of gaming space, featuring 13 table games and 939 slot machines, while Lady Luck’s casino measures 25,000 square feet, with 603 slots and eight electronic table games.

With the completion of the older Eldorado deal, TRWH owns and operates nine casinos in five states.