Eldorado CEO Reeg Looking to Unlock Value in Caesars Online, Sports Betting, Could Lead to Asset Sale

Posted on: August 6, 2019, 04:49h. 

Last updated on: August 6, 2019, 05:19h.

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

Eldorado Resorts, Inc. (NASDAQ:ERI) CEO Tom Reeg is looking for ways to maximize value in his company’s $17.3 billion takeover of Caesars Entertainment Corp. (NASDAQ:CEC), and that could eventually include parting ways with the mobile and online sports betting business.

The bar at Caesars Las Vegas sportsook. The company’s mobile betting operations could be spun off. (Image: Twitter)

As the company reported second-quarter results on Monday, Caesars highlighted growth in its sports wagering business, noting it’s working on seven retail sportsbooks in Indiana and is looking to add retail sports betting locations in Illinois and Iowa, among other states.

When Eldorado completes its takeover of Caesars in the first half of next year, jettisoning the combined company’s online sports wagering operation could be a possibility.

They’ve (Caesars) got an internet casino business that is a material business that I think really gets little to no value,” said Reeg on a conference call with analysts and investors today following Eldorado’s quarterly earnings report. “I’m starting to think about: Is there a way to structurally put something together that shines a light on that business? More of a pure-play fashion.”

The combined company will be the largest casino operator in the US, with more than 60 gaming properties, according to an Eldorado investor presentation.

On the investor call, Reeg did not say for certain how, after the Caesars transaction is completed, the sports wagering business could be moved away from the parent company.

When companies part with operations or units as avenues for bolstering shareholder value, they usually do so by selling the unit outright and returning some of the capital to investors, or by doing a spin-off in the form of an initial public offering (IPO).

If the Caesars/Eldorado sports betting operations are spun-off into another publicly traded entity, the parent company would be able to maintain a stake in the new company, thereby participating in some of its growth.

Potentially enhancing the allure of tapping the online gaming business to unlock shareholder value is Caesars’ footprints in New York and Pennsylvania, two of the largest states. New York hasn’t signed off on mobile betting yet, but Pennsylvania has.

All About Online

Caesars operates casinos in 14 states, nine of which have legalized sports betting operational or have approved it. Excluding West Virginia, where sports wagering is legal and the company recently sold a property, Eldorado owns or operates venues in six states where sports wagering is already permitted or soon will be.

Both companies have been adding mobile sports betting in states where that is permitted, and the combined entity would have one of the dominant online wagering offerings in several states, including Indiana, Nevada and New Jersey. Caesars and Eldorado combine to own four casinos in Atlantic City at a time when online sports betting is booming in the Garden State.

In unison, the companies operate nearly 10 properties in Indiana, which could have sports betting ready before the start of football season. Eldorado runs two casinos in Colorado, a state that votes on sports betting in November.