Icahn out, Eldorado in; Caesars balks at Hoosier fee

Carl Icahn was in a selling mood last weekend, cashing out of Tropicana Entertainment. The buyer was Eldorado Resorts, which paid Icahn $1.85 billion, then flipped nearly all the physical assets to Gaming & Leisure Properties for $1.2 billion. Not content with that, it paid $327.5 million to Hyatt Gaming and MGM Resorts International to relieve them of Grand Victoria riverboat in Elgin. While Eldorado swung the Tropicana deal for a thrifty 6.6X cash flow, it paid top dollar from Grand Victoria, shelling out an above-average 9X cash flow. “The transaction will also be highly accretive, assuming ERI can achieve its projected operation-driven synergies,” reported JP Morgan number-cruncher Daniel Politzer. Having sold the Tropicana real estate to GLPI, Eldorado will pay $110 million rent to GLPI, which also comes out of this deal smelling like a rose. Wrote JP Morgan analyst Joseph Greff, “we think investors are getting an attractive dividend.” GLPI will absorb six of the seven casinos acquired by Eldorado, except for one in the Lake Tahoe market which already sits on leased terra firma.

The Tropicana casinos affected in the deal are Tropicana Laughlin, MontBleu Casino (Lake Tahoe), revenue superstar Tropicana Evansville, Belle of Baton Rouge Casino & Hotel, Trop Casino Greenville (Mississippi), Lumiere Place and of course the flagship property in Atlantic City. That’s 7,900 slots, 265 table games, and 5,400 hotel rooms. Most of these casinos were already well-run assets but an infusion of Eldorado know-how cannot hurt, especially as management is one of the “synergies” (read: layoffs) sure to follow. Politzer hints at outsourcing of F&B jobs at Grand Victoria, for one. Icahn still has a Tropicana-branded casino in Aruba, but that is anticipated to be sold separately. Politzer resumes that Eldorado “expects to fund the $640m transaction through current operations, pending asset sales (i.e., Vicksburg/Presque Isle), cash from operations, and debt.” The company also noted that Grand Victoria has “excess contiguous acreage for potential future development,” so I guess we can see expansion there even if Illinois is a challenged market.

Eldorado has targeted Grand Victoria for $40 million in capex maintenance and other new properties. It won’t have to do much with the Tropicana portfolio, which received $192 million in reinvestment 2016-17 and were budgeted for another $70 million this year. Thanks to its new presence on the Boardwalk, Eldorado also now finds itself a player in the Internet-gambling universe. So, all in all, it was a good day for Eldorado.

* Caesars Entertainment is trying to play hardball in Indiana. In order for its $1.7 billion (read: overpriced) acquisition of Centaur Gaming to go through, Centaur would have to pay a $50 million title-transfer fee. However, this is customarily waived when the seller has been in Chapter 11, as Centaur has been (Caesars too, for that matter). Although Caesars wouldn’t have to pay the fee directly, it’s arguing to the Indiana Gaming Commission that the levy isn’t applicable and if the IGC maintains its current position CEO Mike Frissora will hold his breath until he turns blue. No, but seriously folks, Caesars is threatening to renege on a $90 million onshore casino it was going to build at Horseshoe Southern Indiana. It will be fascinating to see who blinks first over the $50 million. Buyer’s remorse, Caesars?

* Score one against MGM Resorts International. The Massachusetts Gaming Commission refused to grant access to jobs on the casino floor to people with criminal records. “Not to make it too dramatic, but [the] gaming floor from a regulatory perspective is kind of sacrosanct,” said the MGC’s Paul Connelly. “That is a big red flag to us as we do the analysis as to whether we thought they were positions eligible for exemption.” If Massachusetts keeps up like this, Nevada may have to rethink its rhetoric about being the ‘gold standard’ of gaming oversight.

* Penn National Gaming put on a smiley face after paying $1.5 million to make Sioux City-related litigation go away. “We’re very, very pleased that was able to get resolved and get settled and put that matter behind us,” said Penn attorney Doug Gross. Perhaps Penn is so happy because it traded up from Argosy Sioux City to Ameristar Council Bluffs. Even happier were 55 Iowa nonprofits, most of whom lost no time in queueing up for a slice of the Penn money.

* You need a scorecard to keep track of all the culinary changes being made at Seminole Hard Rock Hotel & Casino Hollywood. The massive re-think is part of a $1.5 billion expansion of the overall resort. “Who’s coming, who’s staying — it’s too early to say. Everything is up for conversation. We’re seeking to elevate our dining offerings and service, comparable to what guests find in Las Vegas or anywhere in the world,” said Director of Restaurants Pablo Astardjian.