Eldorado Resorts thought they had the New Jersey regulatory objections sorted away when their purchase target, Caesars Entertainment, sold Bally’s Atlantic City in April for $25 million. The sale would reduce the number of casinos owned in Atlantic City following the merger to just three: Caesars, Harrah’s and the Tropicana. But Eldorado underestimated the Jersey regulators. They had more conditions, 40 in total, but the deal was finally approved, and the transaction will now close sometime next week after shareholders from both companies sign off.
Eldorado executives spent three long days in Atlantic City in hearings before the state Casino Control Commission. The first day was taken up by the commission demanding concessions from Eldorado before they would even consider the deal. Those conditions included a pledge of reinvestment in all the properties that are involved in the deal—and in Bally’s should that deal fall through. Commissioners also required Eldorado to drop deed restrictions at two former properties they owned so those properties could be redeveloped as possible casinos.
The CCC and the DGE have been concerned about the lack of reinvestment of the Caesars-owned properties in Atlantic City. Eldorado CEO Thomas Reeg stressed that would end with the oversight of Eldorado.
“We wouldn’t be doing this transaction if we weren’t believers in Atlantic City because it’s so important to Caesars, as it sits today,” he said.
Reeg said the company would commit to $400 million in capital expenditures over the next three years for upgrades at Caesars, Harrah’s and the Tropicana, adding $125 million for Bally’s should that sale fail to close. And the new ownership pledged to invest 5 percent of annual revenue into the properties after the three years.
One suggestion was that deed restrictions on the Showboat and the Atlantic Club be dropped as a condition of the approval of the sale. Caesars operated Showboat for many years before closing it in 2014 and selling it to Stockton University with a clause that prevents a casinos being operated there. Stockton later sold it to Philadelphia investor Bart Blatstein who wants to open a casino there, but cannot due to the restriction.
A similar clause was inserted into the purchase and sale of the former Atlantic Club, which closed before being purchased by Caesars. The property is now being refurbished as a hotel, but there is no indication the current owners want to reopen the casino.
In the end, the CCC did not require Caesars to drop the deed restrictions.
The second day featured a debate between two economists who disagreed on how the deal would impact the Atlantic City market. The Division of Gaming Enforcement, the investigative branch of the New Jersey regulatory scheme, issued a report to the commission prior to the hearings but failed to state a position, preferring to wait until all the testimony was given during the CCC hearing.
Deputy Attorney General Tracy Richardson said that the debate still left issues unresolved.
“In reflecting on the testimony presented, the division’s concerns, as they relate to the overall uncertainty associated with the transaction, remain,” she told the commission.
And at the end of the second day, two competitors to the Caesars properties, Hard Rock and Ocean casinos, filed petitions citing concerns about market concentration with the deal, even with the sale of Bally’s. CCC officials then ended the session to consider the petitions. Observers believe that the casinos were most concerned with the ending of the deed restrictions, which would have opened the door to a casino at Showboat, sited between the two casinos.
On Friday, the hearing was delayed for 90 minutes, with no explanation. But in the end, the CCC voted 2-0 to approve the deal, with both Chairman James Plousis and Commissioner Alisa Cooper voting in favor. The panel normally has three members but the retirement of Sharon Harrington earlier this month has left a seat vacant.
The Eldorado-Caesars deal had already been approved by 15 other states and the Federal Trade Commission.
In Indiana the week before, Eldorado spokesman James Leahy said the company agreed to 22 financial and operational conditions derived from an investigative report indicating Eldorado is not actually interested in becoming “a true horseracing partner” with the state, “as evidenced by its lackluster efforts at other racetracks that it owns or has previously owned.
Leahy said the racing commission did not require Eldorado to sell any Indiana racetracks. However, the commission would require Eldorado to sell three of the five casinos it would operate post-merger by December 31; commissioners were concerned the five casinos would create “undue economic concentration” in Indiana’s gaming industry. Besides the two remaining racinos. Eldorado also would own Horseshoe Hammond and Horseshoe Southern Indiana in Elizabeth. Eldorado currently owns Tropicana Evansville.
In the 2019 budget year, the five casinos generated nearly 60 percent of the $590.8 million in gaming tax revenue paid to the state. One Indiana commissioner said even a 40 percent market share was too large and suggested selling Horseshoe Hammond in Northwest Indiana.
Reeg asked for but was denied more time to complete any casino sales, due to the economic impact of Covid-19 and market uncertainty in Northwest Indiana. The area draws from Chicago where new casinos are moving forward, including downtown Chicago and south suburban Cook County.
Beyond Indiana, Eldorado will sell Eldorado Shreveport in Louisiana plus the operations of MontBleu Resort Casino in Lake Tahoe to Rhode Island-based Twin River Worldwide Holdings for a combined $155 million. The transaction will satisfy Federal Trade Commission anti-trust concerns in the Louisiana and Rhode Island markets. Twin River also will acquire Bally’s Atlantic City from Caesars for $25 million.
Eldorado also plans to sell one of Caesars’ eight resorts on the Las Vegas Strip. Observers said Native American tribes could be interested, such as the Seminole Tribe in Florida. It’s had success with its Hard Rock properties and the Hard Rock brand is leaving Las Vegas as the existing hotel (never owned by the Seminoles) transitions to Virgin Hotels Las Vegas. Another possibility is the California-based San Manuel Band of Mission Indians owners of a casino in San Bernardino County, which also has philanthropic ties to University of Nevada-Las Vegas and is a sponsor for the Vegas Golden Knights and the Las Vegas Raiders.
