Eldorado Resorts Inc. (ERI - Get Report) confirmed Monday that it will combine with rival Caesars Entertainment Corp., (CZR - Get Report) in a $17.3 billion merger that will create the biggest U.S. gaming company.
Eldorado will pay $12.75 per share for Caesars, the two companies said Monday, in a deal that will see the combined group split 51% to 49% between the two shareholder groups. Once debt for both companies is included, the deal will have an enterprise value of $17.3 billion. Activist investor Carl Icahn, who boosted his stake in the group to 17.75% earlier this year and pushed for either a sale or the merger of the group, said he was "pleased" with the transaction.
"Eldorado's combination with Caesars will create the largest owner and operator of U.S. gaming assets and is a strategically, financially and operationally compelling opportunity that brings immediate and long-term value to stakeholders of both companies," said CEO Eldorado CEO Tom Reeg. "Together, we will have an extremely powerful suite of iconic gaming and entertainment brands, as well as valuable strategic alliances with industry leaders in sports betting and online gaming."
"The combined entity will serve customers in essentially every major U.S. gaming market and will marry best-of-breed practices from both entities to ensure high levels of customer satisfaction and significant shareholder returns," he added.
Caesars shares were marked 16.7% higher Monday, after closing at $9.99 Friday, and changing hands at $11.66 each, a move that would extend the stock's year-to-date gain to around 73% as Icahn pushed for changes in the group's senior management team and business structure.
Eldorado shares were marked 8.8% lower at $46.72 each, a move that would trim its year-to-date gain to around 28% and valued the Reno, Nevada-based group at just under $3.6 billion.
Eldorado will pay $8.40 in cash, as well as 0.0899 in Eldorado shares, for each outstanding Caesars stock, giving its investors 51% of the combined company. The merged group will retain the Caesars name in order to "capitalize on the value of the iconic global brand and its legacy of leadership in the global gaming industry" and will be listed on the Nasdaq Global Select Market.
Since first revealing his holding in Caesars in March, Icahn has moved to oust former CEO Mark Frissora and replace him with the deal-focused Anthony Rodio, who quickly orchestrated a tie-up with Walt Disney Co. (DIS - Get Report) that will see an ESPN studio erected in the LINQ Hotel & Casino for the production of sports-betting content in the wake of last year's move by the U.S. Supreme Court to overturn a federal on sports wagering.
"This merger is the quintessential example of how an activist shareholder, working collaboratively with the Board, can greatly enhance value for all stockholders," Icahn said in a statement Monday. "The deal price represents a premium of 51% over Caesar's trading price on the day before our representatives joined the Caesars Board on March 1, 2019."
"While I criticized the Caesars Board when I took a major position several months ago, I would now like to do something that I rarely do, which is to praise a board of directors for acting responsibly and decisively in negotiating and approving this transformational transaction," he added.
Caesars had also been linked to a merger with U.K.-based William Hill (WIMHY) , which, according to a piece in last week's Sunday Times newspaper, was preparing a £6 billion tie-up with the Icahn-controlled group under CEO Philip Bowcock.