As Caesars Deal Lingers, Buyer Faces $2.3 Million a Day in Fees
As Caesars Deal Lingers, Buyer Faces $2.3 Million a Day in Fees
(Bloomberg) -- Eldorado Resorts Inc. must start paying Caesars Entertainment Corp. almost $2.3 million a day in so-called ticking fees after failing to meet a deadline to complete its takeover of the casino giant.
When the megadeal was announced last June, Eldorado, a smaller Reno, Nevada-based casino operator, agreed to pay Caesars 10 cents a share per month if the transaction didn’t close after nine months. That deadline passed on Wednesday. A pro-rated share of the penalty comes due each day, according to a regulatory filing.
Eldorado has targeted a second-quarter close for the transaction. Like all casino mergers, it requires the blessing of local regulators and may also need the approval of the Federal Trade Commission, which may weigh in on overlap in regional markets. The coronavirus, of course, has thrown a monkey wrench into every business plan, as nearly all casinos in the country closed to prevent the spread of the disease.
A spokesman for Eldorado said last week the company remained “laser-focused” on consummating the transaction. The company didn’t respond to requests for comment about the fees. Caesars declined to comment.
The Caesars purchase was one of the largest deals the casino industry has seen recently, even amid a flurry of mergers and acquisitions. Eldorado agreed to pay cash and stock worth $12.75 per Caesars share at the time. The total value, including debt, amounted to $17.3 billion. The combined company will have some 60 casinos across the U.S.
Ticking fees in big mergers are rare, according to a 2018 analysis by the law firm Paul Hastings. While such penalties can push a buyer to move faster, they are somewhat redundant because most deals have a penalty for not closing, the firm said. Eldorado would owe Caesars $836.8 million more if it can’t close, according to the filing.
Caesars sought the fee in exchange for giving Eldorado an exclusive negotiating period before the deal was announced, according to the filing.
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