To get Caesars properties, Eldorado will need to trim expenses

TAGs: Caesars Entertainment, Eldorado Resorts

It’s no secret that Eldorado Resorts wants at least some of the properties under the control of Caesars Entertainment Corp. There have been talks about a potential deal since this past March and Eldorado is now becoming more proactive in trying to work something out. In order to make something happen, though, the company wants to explore ways to make a deal more financially attractive.

Eldorado really wants Caesars properties, but a reduction in costs is needed firstEldorado wants to cut expenses at Caesars by a minimum of at least $500,000 in order to submit an official offer. To force the reduction, Caesars could be looking at massive employee layoffs, a thinning of the executive level or other cost-saving measures. Eldorado is reportedly combing through the financial records of Caesars with the goal of locating the best sources for reductions.

Sources close to Eldorado have asserted that the company’s CEO, Tom Reeg, is only interested in some type of acquisition or merger if he can be successfully shown how half a million dollars can be saved. Short of that, he is apparently willing to walk away and allow someone else to step in and take over.

Caesars is reportedly worth around $24 billion. Eldorado, on the other hand, only produces about a quarter of its rival’s annual revenue. However, it outperforms Caesars in operating costs, making it a slightly stronger company.

Caesars has already begun looking at ways to cut costs. It slashed its corporate workforce, eliminating redundant and vacant positions. Those cuts will reportedly save the company about $40 million, although it’s difficult to see savings in a vacant position.

Carl Icahn, the billionaire investor who recently became the largest stockholder in Caesars, has gotten involved with the cost-saving endeavor and is exploring how to reduce the company’s corporate expenses, which exceed $332 million. Needless to say, it would be impossible to eliminate all of those costs and Reeg’s expectation of eliminating $500 million in total expenses may be nothing more than a pipe dream.

It wouldn’t be the end of the road for Caesars if Eldorado were to walk away. Tilman Fertitta and his Golden Nugget casino company are still interested in a deal and Fertitta has reportedly been shopping around for some investors willing to get involved. There is also Treasure Island, which has said that it would love to be able to take possession of the company’s operations along the Las Vegas Strip. Caesars will have plenty of options.


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