Eldorado-Caesars Tie-up Doesn’t Change WSOP Locale Uncertainty
This week’s mega-acquisition of Caesars Entertainment Corp. (CEC) by Reno-based Eldorado Resorts answers a lot of questions about Caesars’ financial future, but it’ll do nothing to quell the neverending parlor discussion about where the next home of the World Series of Poker might be, if it was forced to move from its home for the last decade and a half, the Rio All-Suite Hotel & Casino.
If anything, the way the deal was announced and structured and the lag time needed for regulatory approval means that the WSOP is actually far more likely to return to the Rio in 2020, though by next summer, the rumor mills will likely start anew. The reasons the 2020 WSOP now looks like a lock to return to the Rio are multiple in nature.
First, the reports that the Rio was set to be demolished and the entire WSOP moved over to the under-construction Caesars Convention Center still seem to be premature. The new Caesars Convention Center isn’t set to open until next spring, and if any construction delays occurred, it might not be available. Therefore, tearing down the Rio and hoping the newer facility would be ready was always something of a fool’s rumor: The Rio’s space and plentiful parking continue to make it the best Caesars property currently open for hosting the WSOP, and that won’t change soon. The WSOP is a year-round project — as well as being one of Caesars’ most profitable brand properties — and it’s just not going to be moved until its new destination is absolutely ready to go, rumors be damned. Sure, everything could fall into place perfectly and the WSOP could end up elsewhere next year, but I’d lay some serious action against it.
The WSOP also isn’t going to go to one of Eldorado’s other properties, simply because Eldorado didn’t own any properties in Vegas before this deal. And the WSOP is staying in Las Vegas, too; you can bet on it.
Now, for those of you curious about the back story, Caesars has more or less been on the block for several years. Back when it was Harrah’s, over a decade ago, the venture capital firms that picked up the company managed to do a highly-leveraged and debt-laden takeover… right before the bursting of the property-value bubble. Through a name change and a corporate bankruptcy, Caesars has struggled to make ends meet in the face of the red ink (corporate debt) created through that ill-timed takeover.
Signs that Caesars was getting ready to be sold have existed pretty much ever since it came out of bankruptcy a few years back. Yet the interesting thing was financier Carl Icahn buying more and more of the company, even as several potential suitors emerged. Icahn built up his stake to 28% of the company, and when Eldorado offered $12/share for Caesars earlier this year, it was Icahn, reportedly, who nixed the deal.
A Seeking Alpha dig into the situation suggested that Icahn was looking for something more on the order of $14/share, but in the face of Caesars’ debt load, that was likely optimistic. Icahn and Caesars’ board eventually agreed to a slightly sweetened offer that equates to $12.75/share; it’s also part of a cash-and-shares swap that will leave Eldorado — on paper the smaller of the two companies — with a 51% majority of the outstanding shares. Caesars’ current shareholders will retain 49%, collectively, of the new company. That new company will retain the Caesars name, too, a nod to the significantly greater brand recognition that name has with the gambling public.
In addition to a formal press release about the deal, Eldorado has also issued a FAQ explaining several aspects of the deal, including its decision to ride the Caesars name:
Why is Eldorado’s name going to change to Caesars Entertainment?
• Beyond the iconic Caesars Palace Las Vegas Strip property, the name Caesars Entertainment is known worldwide.
• We will assume the Caesars name after the completion of the transaction to leverage the value of this iconic global brand and its legacy of leadership in the global gaming industry.
• While we have built a lot of equity over the years in the Eldorado brand and it will continue to be used at several of our properties, we will seek to leverage the Caesars brand to continue to grow recognition of our company around the world.
• While the name will change, we will not change our approach to property operations and how we interact with guests and provide them service. On the contrary, we intend to apply our core operating philosophy across the Caesars property portfolio following the completion of the transaction.
Seems clear enough. Will what Eldorado describes as a “transformational opportunity” work out well for all involved? There’s a good chance it will, and there’s also a strong chance the WSOP will come through the transition stronger and better as well.
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