Tropicana Sold In Three-Way Deal

Tropicana Entertainment Inc., owned largely by billionaire Carl Icahn (l.), will be sold to Eldorado Resorts Inc. and Gaming and Leisure Properties Inc. for $1.85 billion in cash, giving Eldorado seven casinos in six states. Eldorado also will buy the Grand Victoria Casino in Elgin, Illinois for $327.5 million in cash from MGM Resorts International and its venture partner.

More consolidation in the gaming industry is ahead as billionaire hedge fund manager Carl Icahn’s casino operator, Tropicana Entertainment Inc., is sold for $1.85 billion in cash to Gaming and Leisure Properties Inc. and Eldorado Resorts Inc. Gaming and Leisure will pay $1.21 billion for most of Tropicana’s casinos and will lease the properties to Eldorado, which will pay the remaining $640 million of the purchase price. The deal has been approved by the three companies’ boards of directors.

In a statement, Icahn said: “Icahn Enterprises first acquired an interest in Tropicana in 2008. Tropicana was bankrupt and desperately needed new leadership. At that time, we identified this undervalued asset as being a perfect situation to deploy our modus operandi, by which we seek to acquire undervalued assets, nurture, guide and improve their condition and operations, and to ultimately greatly enhance value for all shareholders. By hiring a great CEO in Tony Rodio and a great management team, and by reinvesting every single penny of profits back into the company, we turned Tropicana into a great casino company.”

Tropicana President and Chief Executive Officer Tony Rodio added, “I am incredibly proud of what the entire Tropicana team has been able to accomplish over the past eight years, taking Tropicana from bankruptcy to one of the industry’s success stories.”

Four years ago, Eldorado held two gaming properties and shared ownership of a third. When the Tropicana acquisition is completed by the end of the year, it will own 26 gaming facilities in 13 states, including seven Tropicana properties in six states: Tropicana Casino and Resort, Atlantic City; Tropicana Laughlin Hotel and Casino and the MontBleu Casino Resort & Spa in South Lake Tahoe, Nevada; Tropicana Evansville in Indiana; Belle of Baton Rouge Casino & Hotel in Louisiana; Trop Casino Greenville in Mississippi; and Lumière Place in Missouri.

Eldorado Resorts Chairman and Chief Executive Officer Gary Carano said, “The acquisition of seven Tropicana Entertainment properties will allow Eldorado to enter two new gaming jurisdictions and deliver additional financial and geographic diversity to our operating base. Ultimately, we believe that the addition of the highly complementary Tropicana Entertainment assets to the Eldorado Resorts family of properties will result in attractive near- and long-term growth for Eldorado and another opportunity to create new value for shareholders.”

In total, the properties include about 7,900 slot machines, 265 table games and 5,400 hotel rooms plus dining, retail and entertainment amenities. When the sale is closed, Eldorado’s property portfolio will feature about 26,800 slot machines and VLTs, more than 800 table games and more than 12,500 hotel rooms.

Last May, Eldorado purchased Isle of Capri Casinos Inc. for $1.1 billion. In another more recent transaction, Eldorado agreed to buy the Grand Victoria Casino in Elgin, Illinois for $327.5 million in cash from MGM Resorts International and its venture partner. Bloomberg Intelligence Analyst Brian Egger said, “The combined transactions increase the company’s geographic diversification, add to earnings and free cash flow and do so at a multiple, after cost savings, well below the average” for regional casino deals.

Upon the announcement, Eldorado had its biggest intraday rally since it began trading on the Nasdaq in September 2014 with shares climbing as much as 21 percent to $43.15. Eldorado shares already had gained 7.7 percent this year through April 13’s close. Gaming and Leisure shares increased as much as 4.7 percent and Tropicana shares rose as much as 30 percent.

Tropicana shareholders must approve the transaction, Icahn Enterprises said in a regulatory filing, which noted if either side terminates the agreement, it would be subject to a $92.5 million fee.

The transaction does not include Tropicana’s Aruba assets, which will be sold as a condition of closing, nor the MontBleu Casino Resort & Spa in South Lake Tahoe, Utah.

Gaming and Leisure Properties Inc. acquires, finances and owns real estate property that it leases to gaming operators in triple-net lease arrangements. With this latest deal, GLPI will become the landlord for all six St. Louis area casinos.

Icahn Enterprises, which buys undervalued assets, improves their operations and ultimately sells them at a profit, acquired Lumière Place from Pinnacle Entertainment in 2013 for $260 million. Pinnacle sold the property to satisfy Federal Trade Commission concerns about competition in the St. Louis market when it acquired Ameristar Casinos. Last December, Penn National Gaming owner of Hollywood Casino and Casino Argosy Alton, announced it will buy Pinnacle Entertainment, operator of Ameristar and River City casinos both in the St. Louis area. That deal has not yet been completed; it required Ameristar in St. Charles to be sold to Boyd Gaming Corporation.

The top-performing casino in the St. Louis market, Lumière posted adjusted gross gaming revenue of $13.1 million in December, an increase of more than 15 percent over December 2016. Revenue increased 9.6 percent to $148.5 million for all of 2016.

Eldorado’s other significant purchase, of Grand Victoria Casino in Elgin, Illinois, about 40 miles west of downtown Chicago, “will allow us, upon closing, to focus on enhancing the guest experience and operating results without the need to undertake capital investments. As we work toward closing this acquisition by the end of 2018, we look forward to welcoming the team at Grand Victoria to the Eldorado family,” Carano said.

He added Eldorado has no immediate plans to renovate the Grand Victoria, or any of the Tropicana acquisitions.

MGM Resorts said it will receive its 50 percent share of the proceeds after certain transaction costs, or around $162 million. The company inherited its half interest in Grand Victoria when it acquired Mandalay Resort Group in 2005.

Grand Victoria features 1,088 slot machines, 30 table games and a 12-table poker room, plus four dining options, 7,495 square feet of meeting and banquet space, event and concert facilities, a 1,450-space parking garage and additional surface parking for 600 vehicles.

In 2017 it posted revenue of $168.7 million, up from $163.5 million in 2016, according to the Illinois Gaming Board. Its revenue has steadily declined since 2007 after a peak of $436.7 million, and employees have decreased from 2,500 to 800.

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