Eldorado CEO Weighs Deals for Leaner Caesars Ahead of Merger

(Bloomberg) -- Although his acquisition of Caesars Entertainment Corp. has yet to close, Eldorado Resorts Inc.’s Tom Reeg has already made his presence felt at the casino giant.

The CEO is looking to slim down Caesars, potentially selling an interest in its online and sports gambling businesses. He’s also discussed outsourcing the company’s entertainment operations, including its theaters and showrooms, according to people with knowledge of the matter. Those deals would be on top of property sales and personnel decisions both companies have made as they prepare for their coming merger.

For Eldorado -- a fast-growing, family-run company based in Reno, Nevada -- the moves are part of a strategy to create a leaner casino operator that’s focused on the core gambling business rather than costly forays into other areas. The $17.3 billion Caesars purchase will form a behemoth that will own or manage about 60 casinos across the U.S., with a deal set to close as soon as next month.

Caesars, whose properties include Caesars Palace in Las Vegas and the Harrah’s in New Orleans, had struggled since a 2008 leveraged buyout left it swimming in debt. It agreed to a sale last year at the urging of activist investor Carl Icahn, its largest shareholder. Tony Rodio, one of the billionaire’s lieutenants, has run the company since March.

But it’s Reeg, a 48-year-old former high-yield bond fund analyst and manager, that will helm the new Caesars. He told investors last year that his target was to shave $500 million in costs from the combined companies -- a number he initially wanted to be higher before Caesars’ board balked, according to two people with knowledge of the matter, who asked not to be identified because the deliberations were private.

A spokesman for Reeg said he wouldn’t be available for comment. A representative for Caesars said “the two companies are operating independently, which will continue until the merger is completed.” Rodio has told shareholders that he’ll pare as much as $100 million in costs through personnel reductions and other moves before the deal closes.

The cuts have included ending initiatives put in place by prior management, such as the pursuit of a casino in Japan. Another unit, which licenses the Caesars name to hotel operators, has been gutted, according to people familiar with the business. One holdover from that era, a new Caesars-branded, non-casino hotel will open next month in Scottsdale, Arizona.

Reeg’s background on Wall Street, and his focus on credit ratings and cash flow, are evident in his strategy, said Barry Jonas, an analyst with SunTrust Robinson Humphrey Inc. who has a buy recommendation on Eldorado.

“You’re dealing with a playbook, where they buy stuff that’s not efficiently run and they optimize it,” Jonas said. “It’s less a ‘let’s expand to Japan and Macau’ or anything like that.’”

Sands Interest

Reeg has already said that he’s considering floating a portion of Caesars’ fast-growing sports and online betting businesses. “They’ve got an internet casino business that is a material business that I think really gets little to no value,” he said on a conference call with investors last year.

He’s also considering a sale of the company’s entertainment operations that could include properties such as the Colosseum concert venue at Caesars Palace, according to three people familiar with his thinking. Las Vegas Sands Corp., meanwhile, has inquired about buying the new Caesars conference center, scheduled to open next month in Las Vegas, another person said.

A Las Vegas Sands spokesman declined to comment.

More property deals may also come. Caesars already sold its Rio casino in Las Vegas last year for $516 million and the Harrah’s in Reno this year, deals that were in the works before the merger. Eldorado, meanwhile, plans to divest three properties in Missouri, Mississippi and Louisiana -- markets where it may face scrutiny from federal antitrust regulators.

Reeg has said he’ll continue selling casinos to reduce debt, including, potentially, casinos on the Las Vegas Strip. The Planet Hollywood or the Ballys would be likely candidates, Jonas said.

Reeg will need cash to reinvest in Caesars’ properties, many of which need refreshing. As the companies sought approval for the merger before Louisiana regulators last month, the state’s gaming control board chairman, Ronnie Jones, noted that Reeg and other executives stayed at a competing casino rather than their own worn down Belle of Baton Rouge. Reeg promised the board he’d improve that property and regulators approved the merger.

“The only reason we have gaming is economic development,” Jones said in an interview. “If that goal is not being achieved, they have to come to us and say what they’re doing.”

Family Affair

A number of Caesars executives are expected to leave their roles after the deal closes, including President Tom Jenkin and Chief Financial Officer Eric Hession, according to people with knowledge of the matter. The departures also will include several high-profile women leaders, including human resources chief Monica Digilio, general counsel Michelle Bushore, and Eileen Moore Johnson, a longtime regional president. All either declined to comment or didn’t respond to a request for comment.

An internal memo from Rodio last month showed three women among 35 executives named for leadership roles within the combined company.

Gary Carano, executive chairman of Eldorado, and his son, Anthony Carano, currently president and chief operating officer, will stay with the merged company. Altogether, about a half-dozen members of the Carano family -- descendants of the founder of Eldorado -- currently work at the company, according to a public filing.

Reeg has his own family ties within Eldorado. His brother William, a vice president of operations, will continue at the new Caesars. Shawn Clancy, Reeg’s brother-in-law, is Eldorado’s chief of development and will be part of the new management team. Rodio will stay on as a strategic adviser, reporting to Reeg.

To contact the reporter on this story: Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Kara Wetzel

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