Former Nevada Gaming Control Chair Bets Regulators Will Approve Eldorado Caesars Takeover

Posted on: April 15, 2020, 10:25h. 

Last updated on: April 15, 2020, 12:44h.

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

Former Nevada Gaming Control Board Chairwoman Becky Harris believes regulators will sign off on Eldorado Resorts Inc.’s (NASDAQ:ERI) $17.3 billion acquisition of rival Caesars Entertainment Corp. (NASDAQ:CZR). But she didn’t offer a guess as to when that might happen.

NGCB Chair Sees Eldorado Still Buying Caesars
Former NGCB Chairwoman Becky Harris sees Eldorado’s pursuit of Caesars making it to the finish line. (Image: Barron’s)

The deal – announced last June – hit regulatory roadblocks because of the coronavirus outbreak. The pandemic is forcing state gaming agencies in Indiana, Nevada, and New Jersey to postpone meetings at which the transaction was slated to be discussed. The Federal Trade Commission (FTC) is waiting on those approvals before it weighs in on an acquisition that will create the largest domestic gaming company by number of properties.

Also, while the current (Nevada Gaming Commission) Chairman Tony Alamo recently announced his decision to step down … Harris noted the deal could be approved without an acting chair – important, given prior appointments have sometimes seen lengthy processes,” said SunTrust Robinson Humphrey analyst Barry Jonas in a note to clients.

The research firm recently held a conference at which Harris spoke. A former Republican state senator, Harris was the NGCB’s first female chairperson. She’s currently a sports betting fellow at UNLV’s International Center for Gaming Regulation.

June Still in Play

While Harris didn’t pinpoint a date or even a month in which ERI’s takeover of the Caesars Palace operator will occur, Jonas did, saying he expects the marriage will be finalized in June. That jibes with some speculation swirling on Wall Street.

Entering 2020, it was widely expected that Eldorado would wrap up the acquisition in the second quarter. But some analysts believed a late first-quarter close was possible.

Caesars operates 53 gaming venues, while ERI has 23 casinos, all of which are temporarily shuttered by COVID-19. Harris said she doesn’t believe the companies will need to reopen their properties to gain regulatory approval in Indiana, Nevada, and New Jersey, reports Gaming Today.

In addition to the coronavirus presenting a hurdle to getting the deal done, the Indiana Horse Racing Commission (IHRC) expressed concern regarding what it perceives as ERI’s lack of horse racing experience. Caesars owns Hoosier Park and Indiana Grand in the state.

That issue should be worked through because Eldorado previously operated Presque Isle Downs & Casino in Pennsylvania and the Mountaineer Casino, Racetrack & Resort in Pennsylvania.

Regional Exposure Could be Helpful

ERI’s and Caesars’ regional portfolios could be helpful in gaining regulators’ approvals, notes Harris by way of Gaming Today, because the combined company will be less dependent on Las Vegas to drive earnings and revenue. Eldorado doesn’t own any Sin City integrated resorts.

The former NGCB chairwoman isn’t the first person to voice that theory. Some Wall Street analysts are making similar comments, noting that even after COVID-19 subsides, gamblers may be reluctant to fly to Las Vegas. But they will get in their cars and drive to a casino that’s close to where they live.

The stocks of ERI and Caesars are down an average of 55.74 percent year-to-date. As part of the deal terms, Caesars investors will receive 0.0899 Eldorado shares for each slice of Caesars equity they currently hold.