• Bloomberg


In the casino business, the minnow is swallowing the whale.

Eldorado Resorts Inc.’s $8.58 billion acquisition of Caesars Entertainment Corp. means an underdog from Reno, Nevada — a town long in the shadow of Las Vegas — will become the largest owner of casinos in the U.S.

In the deal, announced Monday, Caesars shareholders will receive about $12.75 a share, including $8.40 in cash. That’s a 28 percent premium to the casino chain’s close on Friday.

While the combined company will retain the Caesars name, there’s no mistaking who’s buying whom in this transaction: Eldorado, with a market value of less than $4 billion, is clinching the giant from Las Vegas and its flagship Caesars Palace.

Eldorado’s quick ascent to the top of the industry benefited from a campaign by activist billionaire Carl Icahn, Caesars’ biggest shareholder, who pushed for a sale in recent months. The Reno company is buying an ailing Caesars, still coping with the fallout of a 2008 leveraged buyout that left it with a mountain of debt. But it wasn’t the only suitor: Golden Nugget owner Tilman Fertitta proposed merging his restaurant and casino empire with Caesars last year.

Eldorado dates back to a single casino opened in Reno in 1973 by Donald Carano, a lawyer who died in 2017. The town, which calls itself “The Biggest Little City in the World,” has always been the second fiddle of Nevada’s gambling industry.

The business has grown exponentially in recent years under the direction of Tom Reeg, who is now chief executive officer and will lead the combined Eldorado-Caesars along with Chairman Gary Carano and the rest of Eldorado’s management. Among its purchases, Eldorado acquired MTR Gaming Group and Isle of Capri Casinos, and last year added Tropicana Entertainment, which was controlled by Icahn.

“Eldorado is 5 for 5 in the merger department and everyone time they announce synergies, they find more,” said Chad Beynon, an analyst at Macquarie.

Eldorado, which still counts the founding Carano family as its largest shareholder, had 26 casinos in 12 states. Combined with Caesars, it will boast 60 owned, operated and managed casino-resorts across 16 states — including chains like Harrah’s. Tellingly, the enlarged company will be headquartered in Reno.

Like Caesars, Eldorado has had its ups and downs. The Reno market was pummeled by competition from Indian casinos in Northern California and the expansion of gambling across the country. In 2012, the company put one of its subsidiaries — the Silver Legacy Resort Casino, a joint venture with MGM Resorts International — into bankruptcy.

For a time, it seemed the Carano family would be more likely to have long-term wealth from their winery Ferrari-Carano Vineyards in Healdsburg, California. Then the family set on a strategy of diversifying its casino business through acquisitions.

Reeg, a former banker who’s now 47, joined the board of directors in 2007. With the demeanor of an accountant more than a casino boss, Reeg has built a reputation for cutting costs and boosting profits. He consolidated functions at resorts the company acquired and cut back on the promotions that often lead to vicious competition in small markets.

Eldorado also boosted results at its properties by adding additional hotel and dining options, such as the Row, a food court in Reno, and a hotel near its property in Columbus, Ohio. Reeg has proven himself a shrewd negotiator outside of acquisitions, cutting deals with William Hill PLC and the Stars Group in the emerging market of sports betting. He’s also teamed up with Maryland’s Cordish Cos. to develop the area around a horse track in Pompano, Florida.

Still, Reeg will have his work cut out for him with Caesars, which is competing with newer resorts in places like Atlantic City, New Jersey. Apollo Global Management LLC and TPG, the two private equity giants in the 2008 leverage buyout of Caesars, took a bath on the company before exiting the investment several months ago. Their departure allowed Icahn to swoop in.

Caesars casinos are likely to contend with even steeper competition in states such Illinois, which recently authorized six new casinos — including one in downtown Chicago.

Eldorado and Caesars said Monday that they have identified benefits of $500 million by combining the businesses, and expect the deal to boost cash flow immediately. A parallel agreement will see VICI Properties Inc. acquire some of the companies’ real estate, generating $3.2 billion of proceeds to help pay down debt.

“As with our past transactions, we have a detailed plan for significant synergy realization,” Reeg said in a statement.

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