NJ Rolls Dice On $17.3B Caesars Deal As Pandemic Rages

By Jeannie O'Sullivan
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Law360 (July 17, 2020, 7:58 PM EDT) -- The New Jersey Casino Control Commission on Friday granted the final regulatory approval needed to advance the $17.3 billion merger of Caesars Entertainment Corp. and Eldorado Resorts Inc., although regulators noted the gamble of such a transaction in the midst of the COVID-19 pandemic.

In New Jersey, the merger would place the ownership of four out of Atlantic City's nine casinos under a single entity. Caesars Entertainment operates its namesake boardwalk hotel, Harrah's Atlantic City and Bally's Atlantic City Hotel & Casino, and Eldorado acquired Tropicana Casino & Resort Atlantic City's hotel operations in 2018.

The resort town was still recovering from a crushing financial period — one that prompted the state to take over its finances for a time — when the coronavirus shutdown mandates came down in March, just months ahead of the busy tourist season that fuels the popular Jersey Shore destination's economy.

"The stakes could not be any higher," Commissioner Alisa Cooper said during Friday's meeting, which followed two days of testimony by Eldorado officials and economists who weighed in on the potential impact of the merger in New Jersey.

Among the Eldorado representatives who offered "forthright" testimony were President and Chief Executive Officer Anthony Carano and Chief Executive Officer Thomas Reeg, according to commission Chairman James T. Plousis.

Carano acknowledged missteps the company made when entering the market two years ago when it bought Tropicana, while Reeg noted the shortcomings of properties and vowed to rebuild them, Plousis said.

"Petitioners have been honest of the challenges that lie ahead," Plousis said.

On the second day of testimony, the commission heard from Timothy Watts of NERA Economic Consulting, in favor of the gaming companies, and from Martin Perry, head of the Economics Department at the University of Illinois at Urbana-Champaign, for the New Jersey Division of Gaming Enforcement.

Watts considered the New Jersey Casino Control Act's factors for weighing the possibility of undue economic concentration, which Plousis said he thinks "would not exist." Perry expressed the DGE's concern that restrictive deed covenants on surrounding properties, placed at the behest of Caesars in previous decades, should be lifted as a condition of the merger.

Plousis said he had reservations about that condition, noting that condition would benefit from "more study and deliberation."

Ocean Casino Resort and Hard Rock Hotel Atlantic City Casino, two relative newcomers to the resort town's boardwalk, filed emergency petitions to file briefs regarding the DGE's recommendation to lift the deed restrictions, according to Plousis, but they were filed too late and rejected.

The New Jersey element of the merger is also conditioned on a $400 million capital investment. That figure would rise by $125 million if the pending sale of Bally's to Twin River Worldwide Holdings Inc. doesn't close by the year's end, according to Plousis, who threw his support behind the "strong measures."

Eldorado acknowledged the Garden State's approval of the deal in a press release Friday.

"Eldorado and Caesars have received all required regulatory approvals necessary to close the merger," the release said.

All told, the combined company will operate 60 casino-resorts and gaming facilities across 16 states.

The proposed merger was announced in June 2019 and last month received clearance from the Federal Trade Commission. The FTC conditioned its approval on Eldorado selling off several properties to prevent a competition stranglehold.

In addition to securing approval from New Jersey, the merger has also received the blessing of regulators in Indiana, Iowa, Louisiana, Maryland, Mississippi, Missouri, Nevada and Pennsylvania.

Under the terms of the deal, Eldorado will pay $8.40 in cash and 0.0899 of a share of its common stock for each Caesars share. Eldorado's shareholders will own 51% of the combined company while Caesars' shareholders will hold the other 49%.

--Additional reporting by Matthew Perlman. Editing by Jack Karp.     

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