Eldorado Resorts agreed to buy Caesars Entertainment for about $8.5 billion in cash and stock, as a means to take on competition from larger companies such as Las Vegas Sands and Wynn Resorts.
Eldorado will acquire all of the outstanding shares of Caesars for a total value of $12.75 per share, consisting of $8.40 per share in cash consideration and 0.0899 shares of Eldorado common stock for each Caesars share of common stock based on Eldorado’s 30-calendar day volume weighted average price per share as of May 23.
This reflects total consideration of approximately $17.3 billion, comprised of $7.2 billion in cash and approximately 77 million Eldorado common shares and the assumption of Caesars outstanding net debt (excluding face value of the existing convertible note).
The proposed transaction announced on Monday will combine approximately 60 domestic-resorts and gaming facilities across 16 states. It is also planned to merge some large online casinos for a single client base.
“Eldorado’s combination with Caesars will create the largest owner and operator of U.S. gaming assets and is a strategically, financially and operationally compelling opportunity that brings immediate and long-term value to stakeholders of both companies,” said Tom Reeg, CEO of Eldorado.
The company’s board of directors will consist of 11 members, six of whom will come from Eldorado and five from Caesars.
The acquisition comes more than three months after Caesars agreed to give billionaire investor Carl Icahn three board seats to his representatives and a say on the selection of its next chief executive officer. Icahn, who has been pressing for a sale of Caesars, held a 14.75% stake in the company as of March 31, according to data from Refinitiv Eikon.
Eldorado’s offer of $13.01 per share represents a premium of about 30% to Caesars closing price on Friday. The deal price represents a premium of 51% over Caesars trading price on the day before Icahn’s representatives joined the Caesars board on March 1.
Shares of Caesars were up about 15% before the opening bell, while Eldorado was down about 5%.
Caesars, which emerged from bankruptcy in 2017, operates casinos with the Harrah’s and Horseshoe brands. The company owns and operates 34 properties in nine U.S. states and three continents, and its long-term debt stood at $8.79 billion as of March 31.
Eldorado has a market value of about $4 billion. It had a long-term debt of about $3.06 billion at the end of March. The company owns and operates 26 properties in 12 U.S. states.
In a parallel deal, the combined company will sell some of its real estate to VICI Properties to generate $3.2 billion of proceeds to help pay down debt.
Upon completion of the transaction the combined company will retain the Caesars name. The new company will continue to trade on the Nasdaq Global Select Market.
Eldorado and Caesars shareholders will hold about 51% and 49% of the combined company’s outstanding shares following the close of the deal in the first half of 2020.