Eldorado Resorts nearly tripled its gaming property portfolio

When Don Carano founded the Eldorado Hotel Casino in 1973, he likely never envisioned the small hotel-casino on Virginia Street would grow to become one of the largest regional gaming operators in the country.

Eldorado Resort’s recent acquisition of Isle of Capri Casinos makes it just that, though. Eldorado Resorts nearly tripled its gaming property portfolio by adding 13 Isle of Capri properties, giving it a total of 20 hotel-casino properties in 10 states.

The deal has a transaction value of $1.7 billion, including $929 million of long-term Isle of Capri Casinos debt. Eldorado Resorts acquired Isle of Capri Casinos for $23 per share, and Isle of Capri has the option to elect cash or stock subject to proration of 58 percent cash and 42 percent stock. The deal is expected to close in the second quarter of 2017.

It’s yet another complementary piece of Eldorado Resort’s long-term growth strategy, says Anthony Carano, the company’s executive vice president of operations and legal counsel. Two years ago Eldorado Resorts merged with MTR Gaming and added casino properties in Ohio, Pennsylvania and West Virginia, and last year it ended its longtime 50/50 partnership with MGM Resorts at Silver Legacy by buying MGM’s stake in that property as well as neighboring Circus Circus for $72.5 million.

The most recent acquisition allows Eldorado Resorts to diversify and capitalize on its deep bench of management, Carano says.

“This transaction continues to diversify our company across the country and represents a transformational growth opportunity for Eldorado Resorts,” he says. “It’s really just executing on our long-term strategy to expand on our regional gaming platform through these types of accretive acquisitions.

“This particular company (Isle of Capri Casinos) really brings together two highly complementary regional gaming operations and establishes one of the most premier regional gaming operations in the country today.”

The two companies began discussions earlier this year, and the management team from Eldorado Resorts was hot to pursue a purchase after touring many Isle of Capri Casino properties, Carano says. The company has hotel-casinos in Colorado, Pennsylvania, Iowa, Missouri and Florida. The Isle of Capri Casino Hotel at Lake Charles, La., is not part of the acquisition.

“They have a great portfolio of properties across the country with outstanding team members in good markets,” Carano says. “Once we started discussions, the deal came together quite quickly.”

Diversification is key. No single market will account for more than 15 percent of Eldorado Resort’s EBITA, Carano says. It also better positions Eldorado Resorts for future growth because the properties will generate significant free cash flow for debt reduction and future acquisition targets.

The combined entity also benefits from Eldorado Resort’s extensive management experience. There will be a handful of changes in high-level positions due to redundancies, Carano says, but there is not expected to be major changes at the property level.

Despite the nearly $930 million in debt taken on, Eldorado Resorts retains a very strong pro-forma balance sheet, Carano says. Eldorado Resorts will have an approximate 5.1 percent net leverage ratio at closing and expects to be generating significant free cash flow post-closing with the ability to reduce that leverage quickly, Carano notes.

“This isn’t a transaction that levers up the company a great extent in order for us to grow. We plan to use the free cash flow expected to be generated by the combined company to reduce leverage and pursue future growth opportunities.”

The last few years have been a bit of a whirlwind for the Carano family, Anthony Carano admits. The downtrodden years of the recession are firmly in their rear-view, though, and Eldorado Resorts remains committed to its long-term growth strategy. Last week it announced $50 million in renovations to its Reno properties as part of that regional plan.

And there’s still a lot of work to be done to bring Isle of Capri Casinos into the fold, Carano notes.

“The transaction has not yet closed — we have regulatory approvals to obtain and customary closing conditions to meet. We expect to close in the second quarter of 2017, and then it’s time to integrate these 13 assets into the Eldorado family.

“It’s been a very exciting couple of years for Eldorado Resorts,” he adds. “We all are looking forward to getting to work on this acquisition, and we are excited to see what the future holds.”