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MTR Gaming, Eldorado Announce $1B Merger
CHESTER, W.V. -- MTR Gaming Group Inc., the owner of Mountaineer Casino, Racetrack & Resort here, and Eldorado Resorts LLC announced late Monday they have entered into a definitive agreement under which MTR will combine with Eldorado in a stock merger.
As part of the transaction, a cash election option with a value of nearly $30 million will be offered at $5.15 per share for up to 5.8 million shares to MTR Gaming’s current stockholders, according to the announcement. MTR Gaming’s remaining common shares will be exchanged for shares in the combined new company, which will remain publicly traded and be named Eldorado Resorts Inc.
Eldorado’s owners would be issued 35.6 million shares, or approximately 55% of the total shares, in the combined new company valued at $5.15 per share. Based on the transaction value of $5.15 per share, the combined new company would have a pro forma enterprise value of approximately $1.0 billion.
Shortly after the merger agreement was announced, a New York law firm said it is investigating MTR's board of directors for "possible breaches of fiduciary duty and other violations of state law" in connection with the sale.
The law firm, Levi & Korsinsky LLP, says it wants to know if MTR directors breached their fiduciary duties to stockholders by failing to adequately shop the company before agreeing to enter into the Eldorado transaction, and whether Eldorado Resorts is underpaying for MTR shares. In particular, at least one analyst set a price target of $7 per MTR share, according to the law firm.
The combined new company would operate six properties across five jurisdictions including Mountaineer and Presque Isle Downs & Casino in Erie, Pa., with 9,968 slot machines and video lottery terminals, 283 table games and 3,282 hotel rooms.
Privately-held Eldorado Resorts owns and operates gaming properties in Nevada and Louisiana. Its properties include Eldorado Reno, Eldorado Shreveport and Silver Legacy, a 50/50 joint venture with MGM Resorts International. The company was founded in 1973 by the Carano family, whose members continue to hold active management roles.
Gary Carano will be named CEO of the combined company, according to the announcement. The anticipated closing of the transaction is in mid-2014 and is subject to the customary regulatory and closing conditions being satisfied, including approval by MTR Gaming’s stockholders.
“We are excited to announce this transformative transaction, which creates a new gaming platform with a diversified portfolio across the country,” said Carano in a prepared statement. “Our strong balance sheet will allow us to take advantage of future growth opportunities as the gaming industry continues to consolidate. We believe that the MTR Gaming management team will be a significant part of our success going forward.”
“This transaction provides MTR Gaming Group a great opportunity to offer our stockholders a choice to continue to be a part of our future success or to receive a significant cash premium to the current stock price,” said Joseph L. Billhimer, president and CEO of MTR Gaming. “Further, as a more diversified and stronger company, we believe the new Eldorado Resorts will provide greater opportunities with a broader platform for all of MTR Gaming’s existing stakeholders, including our team members, vendors, equity and bondholders and above all, our valued customer.”
For the second quarter, MTR’s total net revenues were $132.3 million, an increase of 11.1% compared to $119.1 million in the same period of 2012. MTR reported net income of $2.4 million for the second quarter, or 8 cents per diluted share, compared to a net loss of $2.4 million, 9 cents per share, for the same period of 2012. Net loss for the second quarter of 2012 included a $0.3 million loss from discontinued operations and $2.2 million of project-opening costs.
Net revenues at Mountaineer decreased 10.6% to $52.4 million in the second quarter compared to $58.7 million in the second quarter of 2012. Revenues from slots and table games decreased by $4.6 million and $1.4 million, respectively, compared to the same quarter of 2012.
Published by The Business Journal, Youngstown, Ohio.
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