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Eldorado completes purchase of MGM's Reno properties

25 Nov 2015

By Howard Stutz
Eldorado Resorts completed its $72.5 million acquisition of MGM Resorts International's holdings in downtown Reno on Tuesday and did so without having to sell additional stock in the company.

The transaction gave Eldorado ownership in Circus Circus Hotel Casino - Reno and the remaining half of the Silver Legacy.

Eldorado, which already owned half of the Silver Legacy and the flagship Eldorado Resort Casino, announced the deal with MGM in July. The company's three Reno properties comprise almost 32% of the hotel rooms in the market. The hotel-casinos are connected via above-ground covered walkways and company officials said the properties would be operated as a single entity.

In a statement, the company said the transaction was financed with cash on hand, cash from an escrow account established in July, and borrowings under the company's revolving line of credit. Eldorado said it withdrew a registration statement for a proposed stock offering, which had been intended to pay a portion of the purchase price. Eldorado stock is traded on the Nasdaq.

A year ago, the Carano family-owned Eldorado merged with publicly traded MTR Gaming and now controls seven resorts in five states; Nevada, Ohio, West Virginia, Louisiana and Pennsylvania.

Eldorado CEO Gary Carano told Nevada gaming regulators this month that the company would operate 4,100 hotel rooms and between 15 and 20 restaurants within the three Reno resorts.

Carano told gaming regulators the transaction would diversify the company's revenue stream. He said the Scioto Downs Racino near Columbus, Ohio, will provide 32% of Eldorado's annual revenue. The three Reno properties will account for 25% of the revenue stream.

"We will not solely be tied to any one jurisdiction," Carano said.

Deutsche Bank gaming analyst Andrew Zarnett said the transaction made "strategic sense" for Eldorado.

"We would anticipate that the cost synergies will result from the elimination of duplicative costs and strategic sourcing, while revenue synergies could be generated by incentivizing cross play," Zarnett said.

Carano said Eldorado wanted to take part in the economic boom being experienced in Reno. Gaming revenue in Reno is up 3.3% through September, which includes a 4.3% increase in slot machine revenue. Visitation to Washoe County is up 1.3% this year. Reed said the company's Reno resorts would account for more than one-fourth of Eldorado's annual cash flow.

The company credited the construction of the Tesla Motors gigafactory and talk around other technology projects with having a positive effect on the market.

"We are very excited to welcome the Silver Legacy and Circus Circus Reno employees to the Eldorado family at a time when the Reno gaming market and the Northern Nevada economy is prospering," Carano said in a statement.

MGM Resorts Chief Financial Officer Dan D'Arrigo said the company "enjoyed being a part of the Reno community over the past decade and wish our employees and the Eldorado family much success in the future."

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