Tom Reeg is in the middle of a big transition and there are a number of loose ends to be dealt with as he takes a giant step that will bring him some interesting challenges.
Reeg is now the chairman at Reno-based Eldorado Resorts which has a deal in hand to buy Caesars Entertainment where he will also be the main man.
The boss of bosses, so to speak. The purchase is what people think of as a mega-deal: $17 billion for about 60 casinos, something like an ambitious minnow with a big appetite deciding to swallow a whale.
But Eldorado has been moving toward this moment one step at a time for several years. Once the deal is approved sometime next year by regulators in Nevada, New Jersey and the several states where Caesars and Eldorado operate, Reeg will put on his Caesars hat and the new company will take flight.
Whether Eldorado continues as a subsidiary brand is not clear yet but Caesars now has Harrah’s, Bally’s and Horseshoe properties which were once big stand-alone names.
We are going to see a lot of buying and selling as Caesars trims it bulk and smaller casino companies look for the chance to grow. That’s what Reeg said during a recent conference call with analysts.
There is a limit to what Reeg wants to tell the world before he is licensed, before he knows what will be required and before he knows who wants what. But he doesn’t mind sharing a few thoughts about what he’d like to see the Caesars guys do while they are still holding the reins and what Eldorado will do once it gets to call all the shots.
This was where he lapsed into metaphors about his team’s careful exploration of the “weeds” among Caesars’ far-flung holdings and suggests a careful “pruning” of some assets is a good idea.
Companies without a presence on the Strip or in Las Vegas may not find a better chance to find the Strip address they want. Reeg said he expects to see the sale of a “major” Strip asset once the sale is complete.
He did not identify the asset. But to even say this much suggests he may be trolling for a show of interest. That would not be surprising. He might not have to look far.
Golden Nugget owner Tilman Fertitta tried to buy Caesars — all of it — last year. His bid was rejected. He ended up buying a pile of Caesars stock and may be staying close in order to keep an eye on opportunities.
But people are looking for signs of interest. I called Michael Gaughn to see if he had any notion in re-acquiring what used to be the Barbary Coast. Gaughan built and opened it for about $11 million in 1979. It became the Cromwell after Harrah’s bought it for about $320 million and spent millions more giving it a new interior.
Gaughan’s response to my question: “You’re the third person who’s called to ask me about that. I don’t think they would let it go for what I might be willing to pay.”
He had always figured the Barbary would be torn down to create better access to the adjacent Flamingo.
On the other hand, the Bally’s brand looks very buyable, particularly for a company that wants instant access to the top two major markets in the U.S.
“Any divestiture activity that you see between now and closing you should expect to be certainly smaller than a Vegas Strip asset,” Reeg said. “Our intention is to focus on fixing the Caesars operating structure, moving it more in line with the way that we (Eldorado) operate, harvesting free cash flow from asset sales and driving leverage down quickly.
“We see a path to generate $4 billion! to $5 billion of debt pay-down in the first 24 months.”