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Eldorado, Caesars merger approved by Casino Control Commission

Eldorado, Caesars merger approved by Casino Control Commission

Bally's Atlantic City

An Eldorado-Caesars deal would put Bally’s Atlantic City, shown here, Caesars Atlantic City, Harrah’s Resort Atlantic City and Tropicana Atlantic City under one owner, which would control four of the city’s nine casinos.

ATLANTIC CITY — State gaming regulators gave the final approval Friday for a $17.3 billion merger of Eldorado Resorts Inc. and Caesars Entertainment Corp., clearing the way for a deal that will create the country’s largest casino operator.

The Casino Control Commission voted 2-0 in favor of the proposal, which for the time being gives one gaming company control of four of Atlantic City’s nine casinos.

Over the course of two days, the commission heard testimony about the merger’s implications for Atlantic City, with a particular focus on the financial stability of the proposed company and the potential for market concentration.

Uncertainty surrounding the novel coronavirus’ effect on gaming and tourism, the economic impacts of restricted casino capacity and a timetable for market recovery also factored into the recommendations for approval and the final decision.

Recognizing the enormity of the merger and the added complexity due to COVID-19, Commissioner Alisa Cooper said the “stakes could not be any higher.”

“It bears to reason that there was significant concern regarding the financial stability, given the magnitude of the impact on the two companies and given unanticipated costs,” Cooper said, adding, “It is very important that the regulatory authorities continue to monitor new Caesars’ financial condition to ensure its ongoing viability as it navigates through these most challenging times.”

Commission Chair James Plousis said there were “legitimate concerns” the new casino company “would be in a position to harm fair competition in the Atlantic City market” if left unchecked, but he felt confident in the 39 conditions imposed with the approval.

“I am satisfied that (Eldorado and Caesars) has met its burden of establishing, by clear and convincing evidence, that it meets each qualification standard under the Casino Control Act,” Plousis said before moving to approve.

The state Division of Gaming Enforcement’s recommended condition to remove all existing deed restrictions on former Caesars assets in Atlantic City — specifically Showboat Hotel Atlantic City, The Claridge hotel and the former Atlantic Club Casino Hotel — was excluded from the final approval at Plousis’ request.

The DGE’s expert witness, Martin Perry, head of the economics department at the University of Illinois at Urbana-Champaign, strongly suggested removing the deed restrictions that prohibit casino gaming at those properties as a means to foster competition and development in Atlantic City.

Hard Rock Hotel & Casino Atlantic City and Ocean Casino Resort both petitioned Thursday to be heard during the proceedings in opposition to removing the deed restrictions. Although the petitions were denied, Plousis said Friday (following an unexplained 90-minute delay to the start of the hearing) he had “significant reservations” about lifting the covenants and later added that doing so would “greatly complicate this matter.”

Further discussion among all stakeholders in respect to removing the deed restrictions was warranted, he said.

Presently, Eldorado operates Tropicana Atlantic City, while Caesars controls Bally’s Atlantic City, Caesars Atlantic City and Harrah’s Resort Atlantic City. Bally’s was recently sold for $25 million to Rhode Island-based Twin River Worldwide Holdings. The sale is pending approval.

The merged gaming company will keep the iconic Caesars name — it will be known as Caesars Entertainment Inc. — and customer loyalty program with Eldorado senior management overseeing operations.

The DGE expressed reservations about the merger, both in a pre-hearing report to the commission and in final remarks delivered Thursday.

“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 on behalf of the division. “As we indicated in our report, the financial success of the merger will be determined, in many respects, by events and circumstances that are beyond the control of Eldorado and cannot accurately be predicted at this time.”

Noting a significant lack of investment in the current stock of Caesars properties, the division strongly pushed for the creation of a $400 million capital investment trust to be used to upgrade the new company’s Atlantic City casinos. The $400 million will be allocated to Caesars, Harrah’s and Tropicana over the next three years.

If the Bally’s sale falls through, an additional $125 million will be placed in the account.

“We understand that we acquire the positives and negatives of Caesars,” said Eldorado CEO Thomas Reeg. “And we know that Atlantic City and New Jersey have had some difficulties with a lack of investment from Caesars, chiefly in the past, and we understand why the conditions are there. We are absolutely committed to agreeing to the requirement.”

The commission approved the creation of the capital expenditures account Friday and appointed John J. Farmer, former state attorney general, to serve as trustee.

Additionally, Eldorado executives testified that 5% of annual net revenue would be reinvested in the Atlantic City properties.

Bob McDevitt, president of Unite Here Local 54, the labor union representing more than 10,000 Atlantic City casino employees, said the organization believes the merger “will have a positive impact on the Atlantic City market.”

“The sale of Bally’s will allow Twin River to invest heavily on a property that has been starved of resources for a decade,” he said Friday. “Eldorado’s commitment to further invest substantial resources on the remaining properties will strengthen Atlantic City’s position as the leader of East Coast gaming.”

Contact: 609-272-7222

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Staff Writer

I cover Atlantic City government and the casino industry since joining The Press in early 2018. I formerly worked as a politics & government reporter for NJ Herald and received the First Amendment: Art Weissman Memorial NJPA Award two years in a row.

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