The multibillion-dollar merger of Eldorado Resorts Inc. and Caesars Entertainment Corp. was approved by shareholders of both companies last week, putting the completion of the deal to create the country’s largest gaming operator on the shoulders of federal and state regulators.
The Federal Trade Commission will be the first regulatory body to review the details of the $17.3 billion merger that would create the United States’ largest owner and operator of gaming assets with nearly 60 properties in 18 states. The FTC will conduct a preliminary review of the merger to determine whether it raises any antitrust concerns that warrant closer examination, according to the agency.
The FTC review is expected to take place in December.
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In New Jersey, two regulatory bodies, the state Division of Gaming Enforcement and the Casino Control Commission, will be responsible for reviewing and approving the deal, respectively.
Both Eldorado Resorts, parent company of Tropicana Atlantic City, and Caesars Entertainment, operator of Bally’s Atlantic City, Caesars Atlantic City and Harrah’s Resort Atlantic City, are current casino license holders. New Jersey gaming regulators will be tasked with determining whether the merger would create an “undue economic concentration,” since the newly formed company, which will operate under the Caesars name, would control four of Atlantic City’s nine casino properties.
Bob Ambrose, an industry consultant and adjunct professor of casino management, said gaming regulators have to carefully consider the impact one company controlling that much of the market may have on Atlantic City.
“I hope there’s no rush here,” Ambrose said. “They need to look at this seriously and consider the entire market.”
Ambrose said it was his belief that the lack of independent ownership in Atlantic City “has been a major problem since casinos came to town.” He said ownership concentration could stifle growth and investment.
“When you have companies that own three or four properties in a market the size of Atlantic City, it’s market dominance,” he said. “Competition should dictate the market.”
Dan Heneghan, a retired public information officer for the Casino Control Commission and former casino beat reporter for The Press of Atlantic City, said state gaming regulators are “concerned about economic concentration in the casino industry for many of the same reasons that the (federal) Justice Department is concerned about monopolies in industry in general.”
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“If you have a monopoly, or something close to a monopoly, there’s always the concern that the big player can effectively set prices” to the determent of the customer, Heneghan said.
While there is no set timetable for New Jersey regulators to make a determination on the merger, the gaming operators have said they expect the deal to be finalized by the first half of 2020.
The two gaming companies submitted a joint petition to state regulators in September that said they intend to present an economic analysis that demonstrates the merger would not create an undue economic concentration.
The state Office of the Attorney General, of which the DGE operates under, said New Jersey gaming regulators would also retain an expert.
“As required by law, the Division is responsible for ensuring the honesty, integrity and financial stability of casino licensees,” the OAG said in an email. “Part of this process is analyzing the economic impact of casino acquisitions such as the Eldorado / Caesars merger. As part of this process the Division has retained an economic expert to assist with the review of this merger.”
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The proposed deal and its impact on the market in Atlantic City are further complicated by the fact that Caesars Entertainment has three outstanding deed restrictions on former casino properties. The former Atlantic Club Casino Hotel, the Claridge Hotel and the Showboat Hotel Atlantic City all have restrictions that prevent them from operating as gaming parlors.
Claridge and Showboat are currently operating as non-casino hotels. The Atlantic Club, which has been closed since 2014, was recently sold, and the new owner has said it intends to operate the property as a noncasino hotel.
Showboat owner Bart Blatstein has expressed his desire to resume gaming operations on his property and received a statement of compliance — a preliminary step that affirms his financial suitability — from state gaming regulators earlier this year. Blatstein testified that he intends to circumvent the deed restriction by constructing a facility on an adjoining lot, but has yet to move forward with those plans.