Indiana Regulators Approve $17 Billion Eldorado-Caesars Merger

The merger between Eldorado and Caesars has finally been approved by regulators in Indiana.

The $17.3 billion merger received approval from the Indiana Gaming Commission (IGC) during its meeting on July 10. This was followed by the Indiana Horse Racing Commission’s (IHRC) endorsement of the merger in their meeting on July 13.

Eldorado’s executives will run the newly merged company, which will retain the name and branding of “Caesars Entertainment”.

Regulators in Nevada and the Federal Trade Commission recently gave the merger a thumbs up.

Now that Indiana has agreed to the merger, the only remaining obstacle to clear for the merger is the regulators in New Jersey.

Assuming that New Jersey gives its approval at a meeting on July 15, Eldorado CEO Tom Reeg anticipates that the merger could be finalized by the beginning of next week.

Despite the merger receiving approval from the IGC and IHRC, it still encountered several hurdles from regulators in the Hoosier State.

The Horse Racing Commission had reservations.

The concerns of the IHRC were directed towards Harrah’s Hoosier Park in Anderson, Indiana, and Indiana Grand in Shelbyville.

The commission deems the two racinos as being in prime condition and wishes for this to remain unchanged after the merger. Prior to selling them to Caesars in 2017, Centaur Holdings established a high standard for both racetracks.

Reeg expresses his understanding of Indiana’s racetracks being among the best in the country. He further pledges to maintain the highest possible standards for them following the merger.

Reed stated, “We comprehend that this commission, upon granting us the opportunity to own these tracks, will have to keep us accountable.”

The IHRC announced they had some major concerns about the merger a week before their meeting on July 13.

The commission contended that Eldorado had failed to maintain the racetracks it had previously purchased.

Knowing in advance about the IHRC’s concerns, Reeg and his team prepared an elaborate plan to reassure the commission’s members at the meeting. This plan was packed with numerous innovative ideas such as:

• A commitment of $60 million to enlarge Indiana Grand and Hoosier Park
• A commitment to allocate $25 million for the maintenance of racetracks every decade.
• Interest is being jump-started by adding $1 million to racing purses from 2020-2022.
• Community organizations and charities in Shelbyville and Anderson received $250,000 in donations.

Executives from Eldorado conceded that they could have improved their maintenance of their other racetracks. They encouraged the commission to concentrate on the present instead of the company’s previous shortcomings.

Eldorado and Caesars agree on new terms.

The new plan that Eldorado announced at the meeting impressed the horse racing commission.

Besides the new commitments, the company also consented to a list of 22 comprehensive requirements from the IHRC.

The majority of these requirements are financial, but they also encompass aspects such as yearly racing operations plans and collaboration with the Horsemen's Association.

Eldorado’s executives, eager to get the merger approved, came into the meeting prepared to exceed the IHRC’s expectations.

Eldorado took a new step by hiring Joe Morris as its Senior Vice President of Racing.

Morris expressed his belief that the racing division of the company has been lacking in communication. He is confident that enhancing this aspect will significantly prevent Eldorado from making the same errors it has made in the past.

“You can’t operate a racetrack remotely. It’s essential to be present daily, communicating with your horsemen, customers, owners, drivers, and your employees for it to function effectively.”

The merger was approved by the IHRC once its conditions were met.

However, the new Caesars will also have to comply with certain conditions set by the gaming commission.

IGC is against a monopoly of casinos in Indiana.

At its July 10 meeting, the IGC unanimously approved the merger.

Nonetheless, the approval was granted with a few stipulations.

Initially, the newly merged Caesars must maintain its current employment levels for a minimum of three years. These levels encompass any employees presently on furlough.

In light of the employment instability caused by the COVID-19 pandemic, the IGC aimed to ensure that casino and racetrack workers were not unfairly disadvantaged.

Additionally, the IGC is worried about a single company monopolizing the state’s gambling industry.

If no alterations are made, the new Caesars would dominate approximately 60% of Indiana’s casino market.

The company had proposed selling two separate casinos – Tropicana Evansville and Caesars Southern Indiana, as identified by Reeg, to reduce the number to approximately 40%.

The new company would approach Caesars’ current pre-merger market share in Indiana by selling two casinos.

The IGC believed that was not sufficient.

The commission doesn’t object to a 40% market share. However, given the significant investment that the new Caesars intends to make in its Indiana properties, the IGC anticipates that Caesars may control 60% of the market within two to three years.

Therefore, to counterbalance the potential future growth, one of the conditions set by the IGC was that Caesars had to sell a third casino in the state.

Horseshoe Hammond is on the market.

Reeg stated that Horseshoe Hammond is likely to be the third Indiana casino that the company plans to sell.

Considering Hammond is the state’s most profitable retail casino, that’s an interesting choice.

Essentially, Caesars doesn’t wish to compete against Illinois.

Now that sports betting is legal in Indiana’s western neighbor, maintaining Hammond’s dominance over the area will be more challenging. The casino is a mere 20-minute drive from downtown Chicago.

Caesars would prefer to completely withdraw from the area, despite sports betting being only a fraction of the whole business, due to the presence of several competing casinos on the Illinois side of the border.

Reeg requested an 18-month timeline for selling the three casinos, with the aim to complete the sale by January 2022.

The commission, however, believed that was too much time. Now, Caesars has until December 31, 2020 to commence.

Commissioner Marc Fine expressed his worries regarding the maintenance of those three casinos during their sale process.

“We always have the option to extend those time periods at a later date. I really don’t want to see a property remaining idle for 18 months, as if it’s just hanging on the vine. That duration seems excessively long to me.”

Tropicana Casino, where Fine resides, is currently located in Evansville.

Given that the Tropicana is being sold after the merger, it’s understandable that Fine wouldn’t want the casino to be neglected. Obviously, during the months of the sale, Caesars, the current owner, wouldn’t give the property much attention.

After some discussion, the remaining members of the IGC concurred with Fine and decided on the December 2020 timeline.

Caesars will have a strong presence in Indiana’s market for many years following the state regulators’ final approval of the merger.