RENO, Nev. — Eldorado Resorts, Inc. announced today that it entered into a definitive agreement to acquire Tropicana Entertainment Inc. in a cash transaction that is valued at $1.85 billion and the Grand Victoria Casino in Elgin, Ill. for $327.5 million in cash.
The definitive agreement provides that Gaming and Leisure Properties will pay $1.21 billion, excluding taxes and expenses, for substantially all of Tropicana’s real estate and enter into a master lease with Eldorado for the acquired real estate and that Eldorado will fund the remaining $640 million of cash consideration payable in the acquisition. The transaction is expected to be immediately accretive to Eldorado’s free cash flow and diluted earnings per share, inclusive of identified expected cost synergies of approximately $40 million in the first year following its completion and when giving effect to the lease transaction described below.
Pursuant to the transaction, GLPI is expected to acquire the real estate associated with the Tropicana property portfolio, except the MontBleu Casino Resort & Spa in South Lake Tahoe and the Tropicana Aruba Resort and Casino. Following the acquisition of the real estate portfolio by GLPI, Eldorado will enter into a triple net master lease for the acquired properties with an initial term of 15 years, with renewals of up to 20 years at the Eldorado’s option. The initial annual rent under the terms of the lease is expected to be approximately $110 million. Tropicana intends to dispose of Tropicana Aruba Resort and Casino prior to closing.
Eldorado’s net purchase price after the application of Tropicana’s expected net cash on hand and cash flow generated from operations through closing represents an estimated trailing twelve months EBITDA multiple of approximately 6.6x at closing. Including the $40 million of identified cost synergies, the purchase price multiple is expected to be below 5.0x. The board of directors of each of Eldorado, GLPI and Tropicana approved the transaction, which is expected to close by the end of 2018, subject to receipt of required regulatory approvals and satisfaction of other customary closing conditions.
Eldorado intends to fund the transaction consideration of approximately $640 million payable by Eldorado and repay debt outstanding under Tropicana’s credit facility with cash generated from its current operations, proceeds from pending asset sales, Tropicana’s cash on hand, cash flow generated from Tropicana operations through closing and $600 million of committed debt financing from J.P. Morgan.
Eldorado Resorts is acquiring the operating assets of seven casinos in six states, including two in Nevada – the Tropicana Laughlin Hotel and Casino and the MontBleu Casino Resort & Spa in South Lake Tahoe – as well as casinos in Indiana (Tropicana Evansville), Louisiana (Belle of Baton Rouge Casino & Hotel), Mississippi (Trop Casino Greenville), Missouri (Lumière Place) and New Jersey (Tropicana Casino and Resort, Atlantic City). These properties include approximately 7,900 slot machines, 265 table games and approximately 5,400 hotel rooms along with a number of dining, retail and entertainment amenities. Upon completion of all pending transactions, Eldorado’s expanded property portfolio will feature approximately 26,800 slot machines and VLTs, more than 800 table games and over 12,500 hotel rooms.
Gary Carano, Chairman and Chief Executive Officer of Eldorado, commented, “With our proposed acquisition of Tropicana Entertainment, Eldorado Resorts is yet again pursuing a large transaction that is expected to be accretive, further increase the scale of our regional gaming platform and drive free cash flow growth. Our recent initiatives to enhance shareholder value, including the Tropicana transaction and our agreement to divest two properties, reflect significant milestones in the successful ongoing execution of our long-term strategy to opportunistically expand our regional gaming platform. Over the last twelve months, we have created tremendous shareholder value through our ability to realize and exceed the anticipated synergies from the Isle of Capri transaction which quickly reduced our initial purchase price multiple and we expect to achieve the same with the Tropicana transaction.
“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. We have identified $40 million of synergies that we expect to realize in the first year of our ownership. We believe the financing structure for the transaction, which includes the participation of a real estate investment trust, represents an innovative means to drive growth and add value for our shareholders while maintaining financial flexibility as we continue to own the majority of the underlying real estate across our remaining property portfolio.
Milbank Tweed Hadley & McCloy LLP is acting as legal counsel to Eldorado in connection with the proposed transaction.
Total consideration for theGrand Victoria Casino transaction represents a purchase multiple of approximately 9.0x trailing twelve months Adjusted EBITDA (for the period ended Dec. 31, 2017) which Eldorado expects to reduce to approximately 6.0x or less within 18 months of the transaction’s closing based on expected operating synergies and cost savings. The Company intends to fund the proposed transaction using cash from previously announced asset sales, cash from ongoing operations and borrowings under its revolving credit facility. The transaction is expected to close in the fourth quarter of 2018, subject to regulatory approvals and other customary closing conditions and is subject to a customary working capital adjustment.
Gary Carano, Chairman and Chief Executive Officer of Eldorado, commented, “This transaction represents yet another milestone for Eldorado as we continue to opportunistically expand our regional gaming platform through accretive acquisitions. The addition of Grand Victoria Casino will further diversify the geographic reach of our operations and includes excess contiguous acreage for potential future development. Importantly, the acquisition is consistent with our long-term strategy to enhance shareholder value by structuring transactions that are strategically and economically attractive and offer significant upside as we implement our proven operating disciplines.
“Grand Victoria is one of the leading casinos in the Chicagoland market and is extremely well maintained which 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 towards closing this acquisition by the end of 2018, we look forward to welcoming the team at Grand Victoria to the Eldorado family.”
Grand Victoria Casino, located in Elgin, Illinois, is approximately 40 miles west of downtown Chicago along the banks of the Fox River. The property features 1,088 slot machines, 30 table games, a 12-table poker room and four dining options, including Prime BurgerHouse, the award-winning Buckinghams Steakhouse & Lounge, the Indulge Show Kitchen Buffet and the 24-hour Crave Deli. It also offers 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.
BofA Merrill Lynch is acting as exclusive financial advisor and Milbank Tweed Hadley & McCloy LLP is acting as legal counsel to Eldorado in connection with the proposed transaction.