New Jersey Eldorado, Caesars deal moving ahead

Eldorado, parent company of Tropicana Atlantic City, and Caesars, operator of three casino hotels — Bally’s Atlantic City, Caesars Atlantic City and Harrah’s Resort Atlantic City — filed a joint petition seeking approval of the merger with the state Division of Gaming Enforcement in early September.

New Jersey gaming regulators could consider the petition as early as January 2020, according to sources familiar with the timetable.

Shareholders from the two gaming companies will meet Nov. 15 to vote on the proposed $17.3 billion deal that would create the country’s largest gaming operator. The two companies also recently announced the makeup of an 11-member executive board, with six representatives from Eldorado and five from Caesars, that will be finalized once shareholders vote next month.

Once the deal has been approved by shareholders, the Casino Control Commission will consider the petition following the completion of an investigation by the DGE. The CCC must consider several factors before approving the merger, including whether a single casino gaming company operating four of Atlantic City’s nine properties would create an “undue economic concentration.” Absent any changes, the proposed gaming company would employ 40% of the industry’s workers and represent nearly 37% of total gaming revenue in Atlantic City.

Eldorado and Caesars intend to present analysis and testimony from Timothy Watts, managing director of National Economic Research Associates, to demonstrate that the merger would not result in an undue concentration. Watts’ report is expected to be submitted to gaming regulators “in the very near future,” according to the filed petition.

Eldorado CEO Tom Reeg has said that the new company will realize $500 million in “synergies,” once the merger is completed. Reeg also suggested that the prospect of selling assets, particularly in already crowded markets such as Atlantic City or Las Vegas, is likely during a recent earnings call.

Hard Rock Hotel & Casino Atlantic City and Ocean Casino Resort both reopened vacant properties in 2018 that were shut down following several years of declining gaming revenue and, ultimately, resulted in five of the city’s gaming halls closing within a two-year period. Total gaming revenue has increased in each monthly reporting period since the dual casino openings last year.

The newly formed gaming company will keep the Caesars name “in order to capitalize on the value” of the brand, the joint petition stated, and become a Delaware-based corporation.