Twin River advances, Maverick retreats; Sands optimistic

Twin River Holdings is now a player in Atlantic City. It must have driven a hard bargain, too, picking up lowly Bally’s for $25 million, mere pocket change. It had Caesars Entertainment and Eldorado Resorts over a barrel, as keeping Bally’s would have given the merged companies four casinos in the city, the very definition of “undue market concentration.” Or as pundit Dan Heneghan put it, the deal would “significantly reduce the level of economic concentration and that will make it a lot easier for the Casino Control Commission to approve it. The fact that it is being sold to a new player for the market here will help increase competition.” A sale to Maverick Gaming having fallen through Eldorado flipped Eldorado Shreveport and Lake Tahoe‘s Montbleu Resort Casino & Spa to Twin River. Reflecting the value of the markets (especially Shreveport), the deal is for $155 million.

Maverick had been on a hyper-aggressive buying spree but the paralysis of its gaming operations by Coronavirus has evidently inspired it to hunker down. “At this time it is more important for Maverick to nurture and protect their existing assets than it is to expand our asset base” said company owner Eric Persson. “They are great assets, and in a normal environment, we would be very excited to own them.” (emphasis added) One of the reasons that Twin River was able to pick up Bally’s for a song was that the agreement entails the sportsbook and Wild Wild West gambling area to be cordoned off and made part of Caesars Atlantic City (there goes the high-roller image), meaning Twin River will have to pony up for a new book. The sale was, a Caesars spokesman said, “a strategic initiative that Caesars Entertainment had been pursuing long before the onset of the Covid-19 pandemic.” We believe them.

Meanwhile, “near-catastrophic” is how the Atlantic City economy is described, especially if casino closures (for which there is no end in sight) persist past June 1. According to Global Gaming Business, “the county has 3 percent of the state’s population, but 6.1 percent of its unemployment claims.” Economic consultant Rich Perniciaro told the magazine, “Thirty-four percent of all jobs in Atlantic County are in at-risk industries.” Nor is the damage confined to casinos per se, given the number of dependent small businesses that are experiencing trickle-down effects. At present, Gov. Phil Murphy (D, right) is shooting for a June 1 reopening, which almost suits Stockton University professor Michael Busler. “My view is that the casinos and the resort businesses must be able to re-open prior to Memorial Day … The [Covid-19] risk is lower here, so I think it is reasonable to start to re-open the shore around May 15, so the casinos and other businesses are ready for Memorial Day.”

Busler thinks a lack of mandatory protective gear and social distancing is a “somewhat optimistic outcome,” with everything back to normal by July 4. Stockton economics professor Oliver Cooke‘s view is less roseate: “it strains credulity to believe that we will all do [business] at the same levels we previously did for what remains of 2020.” One silver lining for New Jersey: Now that customers are in the habit of gambling on the Internet, they will probably continue to do so, much to the benefit of the Golden Nugget, Resorts Atlantic City and Borgata, who are all ahead of the curve.

* We can finally say that casinos are coming to Virginia (and not a moment too soon) now that the Lege has easily approved the amendments to the enabling legislation made by Gov. Ralph Northam (D). This clears the decks for Nov. 3 local votes on whether to approve gambling in five Virginia cities. To qualify, according to Casino.org, you have to have had “an unemployment rate of at least five percent in 2018, a poverty rate of at least 20 percent 2017, and a population decline of at least 20 percent from 1990 to 2016.” Taxation of gambling revenue will be on a sliding scale starting at 18% of gross gaming revenue ($1-$200 million), topping out at 30% for $400 million and higher. Sports betting, as amended by the governor (including usurious application fees) was also blessed by the Lege. Wagering on scholastic sports from Virginia schools is nixed but everything else is fair game. There are to be 12 sports books, taxed at 15%.

* The way that gaming is structured in Macao, there are presently three concessionaires and three ‘sub concessionaires,’ who bought their license, essentially, from the concessionaires, sometimes for astronomical prices. (The arrangement was devised by the local government when a shotgun wedding of Las Vegas Sands and Galaxy Entertainment ended in divorce.) New Chief Executive Ho Iat Seng wants to end that arrangement. He’d eliminate sub concessions and possibly open more concessions for bidding. Where this would leave current sub concessionaires like MGM Macau is a multi-billion-dollar question. It certainly appears to open the door for new bidders and we can think of several companies (Genting Group, for one) desperate to get in. Would Caesars reverse field on Gary Loveman‘s mistake of passing on the Macao market, a decision made in haste only to be repented at leisure?

* Normally when we hear the phrase “pent-up demand” we roll our eyes (unless there’s pent-up money behind it). However, where Asian players are concerned we take it seriously. So does Las Vegas Sands, although it’s
not speaking for attribution. “We hear anecdotally that people are really frustrated and want to go back to gambling in casinos,” said a Sands exec. “The idea of a mask or social distancing or thermometer checks will not be difficult for local Singaporeans or Chinese. They will accept it, they will deal with it.” The implications are that Americans are less tractable. However, Sands does report a late-summer/autumn uptick in group business in Las Vegas. The company only lost $1 million in the first quarter, although that has to be set against a $582 million profit in 1Q19.