Eldorado Contending With New Jersey Regulators’ ‘Uncertainty’ on Caesars Deal, Testimony Heads to Third Day

Posted on: July 16, 2020, 03:28h. 

Last updated on: July 16, 2020, 04:14h.

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

Members of the New Jersey Division of Gaming Enforcement (DGE) are expressing concerns about Eldorado Resorts’ (NASDAQ:ERI) proposed $17.3 billion takeover of Caesars Entertainment (NASDAQ:CZR), causing testimony on the acquisition to drag into a third day.

NJ Has Eldorado Concerns
Harrah’s on the Atlantic City Boardwalk. New Jersey regulators are taking their time on approving Eldorado’s takeover of that hotel and three others there. (Image: NJ.com)

After winning approval for the takeover from the Federal Trade Commission (FTC) in late June and two regulatory bodies apiece in Nevada and Indiana this month, Eldorado management headed to the Garden State on Wednesday. But DGE has yet to issue a recommendation on the matter to the Casino Control Commission (CCC).

In reflecting on the testimony presented, the division’s concerns, as they relate to the overall uncertainty associated with the transaction, remain,” Deputy Attorney General Tracy Richardson said, according to The Press of Atlantic City.

Testimony is slated to continue Friday, indicating the length of time New Jersey is taking to weigh in on the transaction is lengthy compared to Nevada and Indiana. Last week, the Nevada Gaming Control Board (NGCB) and the Nevada Gaming Commission (NGC) wrapped up proceedings on the deal in a day, while the Indiana Gaming Commission (IGC) and Indiana Horse Racing (IHRC) each need just one meeting to grant the go-ahead.

New Jersey DGE is waiting for testimony to conclude before issuing a recommendation to the CCC.

Acceptable Conditions

In Wednesday testimony before the CCC, Eldorado CEO Tom Reeg said conditions set forth in a DGE report are acceptable to his company. Those include releasing of deed controls on three old Caesars assets in Atlantic City – Showboat Hotel Atlantic City, The Claridge hotel, and the former Atlantic Club Casino Hotel.

Reeg also told regulators a $400 million account has been created, funds from which will be spent over three years to revamp ERI’s Tropicana, Caesars Palace, and Harrah’s on the Boardwalk. If the $25 million sale of Bally’s to Twin River Worldwide Holdings (NYSE:TRWH) is scrapped for some reason, ERI will add another $125 million to that account.

The odds are long that the Bally’s deal will collapse, because the FTC already signed off on TRWH as a financially suitable buyer of other ERI assets that were central to winning federal approval for the Caesars takeover.

The issues with the deal raised by Richardson are largely beyond the control of ERI or any operator. Those include the lingering effects of the coronavirus on Atlantic City gaming and tourism, reduced capacity protocols, and lack of visibility regarding how long it will take the industry to rebound from the pandemic.

Concerns Don’t Mean Denial

Regulators’ concerns don’t mean the deal creating the largest casino operator is doomed in the Garden State. In fact, ERI recently traveled a similar road. Prior to the recent IHRC meeting, a staff report to that commission derided ERI’s commitment to horse racing. But the commission unanimously approved the transaction.

Likewise, some market observers previously said it’s unlikely that New Jersey would render a decision that runs counter to the FTC’s call on the matter.