Cantor to take over operation of the Caesars books

May 17, 2011 6:09 AM

Cantor Gaming will take over operation of the Caesars Entertainment sports and race books, according to a deal that will probably be complete by the end of the month.

The confirmation of this still-developing deal comes from three different sources familiar with the negotiations but who could not be identified because they do not have official spokesman status.

Cantor is said to be interested in making its first installation at Caesars Palace and then moving to the other books one at a time until a Caesars Nevada network is complete. Timing is crucial, because both Caesars and Cantor officials would want to have a showplace kind of facility ready for the start of football season.

The possibility of a Cantor deal with Caesars was first mentioned in this space several months ago but creative differences within the Caesars family of executives resulted in negotiations fading into nothing.

One of the details of the pending agreement will have Cantor (or the successful bidder if this should end up going in another direction) agreeing to a $50 million guarantee – $5 million a year – over 10 years. This figure has been based on an average of book profits over the last several years.

One of the issues that may provide a challenge for executives on either side of this deal is a supposed Caesars requirement that Cantor Fitzgerald, the UK-based financial services giant that is the corporate parent of Cantor Gaming, guarantee the annual payment. CF has the deeper pockets of the two at this point in time. There is a tiered formula for dividing profits above $5 million.

Cantor is also guaranteeing in this proposal that there be some heavy duty upgrading of facilities in the books at Caesars. This is not surprising considering what Cantor has already done or is in the process of doing at sports books such as the Hard Rock, Tropicana and Cosmopolitan.

Aside from the comfort an annual guarantee offers, Caesars will also benefit from the savings related to the millions necessary to staff, operate and market a sports and race wagering business in an industry that is top-heavy with state and federal regulations.

The impact of UK-based bookmaker William Hill’s recent Nevada shopping spree has had a lot to do with Nevada operators rethinking strategies at a time when resort owners are more focused than ever on maximizing both efficiency and profit potential in an industry that has a strong upside, depending on the look of Internet regulations taking shape in Washington.

But there is evidence of other factors helping to drive the flurry of let’s-make-a-deal talks with outside operators. They include recent indications federal investigators have been turning their attention to possible violations of the law by gamblers using the books. Some resort operators have received certified letters from the financial crimes people seeking information about "messenger betting."

This is the sort of situation that can ruin a resort operator’s week, so why not get out of the business of directly operating the books and develop comfortable lease arrangements with established licensable professionals who will handle whatever liability issues might arise.

Looking toward the future, here’s a prediction from an executive with a good view of the local sports and race wagering business.

"If Caesars and Cantor get together," he said, "I think we can look forward to a marriage between Hill and MGM."

What might this mean to customers at any of these wagering parlors?

Gamblers usually benefit when the competition for their spending intensifies.