US casino giants Caesars Entertainment and Eldorado Resorts are pushing ahead with plans to merge their operations, although the timeline will likely be pushed back a few months.
On Tuesday, CNBC quoted a source with firsthand knowledge of the imminent union of Caesars and Eldorado saying the transaction, which was expected to close sometime in April, will now likely not be a done deal until June.
The delay has been blamed on disruptions stemming from the COVID-19 pandemic, which has shut down all commercial casino operations across the country. Social distancing efforts aimed at minimizing further transmission of the coronavirus have resulted in the postponement of public hearings with gaming regulators in Indiana, New Jersey and Nevada.
Delays in obtaining regulatory approval in the countless other states in which the two companies operate have already proven costly. The deal terms require Eldorado to pay Caesars shareholders a monthly penalty of 10 cents per share if the transaction wasn’t closed within nine months of its public announcement. That nine-month deadline expired last week.
Regulatory filings show Eldorado is now being charged a pro-rated share of these fees amounting to around $2.3m for each and every day that the process remains unconsummated. Sadly, the deal terms prohibit Eldorado from citing ‘public health emergencies’ to explain its inability to meet its agreed upon schedule.
Neither company is currently generating any real revenue, although Caesars does have a respectable presence in New Jersey’s regulated online gambling market. Caesars has furloughed a significant number of its rank-and-file employees, while Eldorado has committed to keeping its staff on the payroll until April 10.
Investors, who had feared the merger was on the ropes due to the coronavirus, reacted predictably to Tuesday’s news. Trading in Caesars stock was briefly halted following the CNBC report, and when trading resumed the shares shot up 12%, although they closed up a more modest 5.3% and fell further in after-hours trading. Eldorado’s stock fared better, closing up nearly one-fifth although currently down nearly 3% after-hours.
