Tilman Fertitta

Golden Nugget Owner Tilman Fertitta Has Proposed Merger with Caesars

According to numerous reports citing sources close to the situation, Tilman Fertitta, the Chairman, CEO, and owner of Landry’s Inc, the parent company of Golden Nugget Casinos, is not just interested in merging with Caesars Entertainment, but has discussed the possibility with his gaming rival.

CNBC has reported that Fertitta’s proposal would value Caesars at $13 per share. Caesars (NYSE: CZR) is currently trading at $10.20 per share. It closed at $9.09 on Tuesday, jumping to $10.20 on Wednesday, the day the news hit.

Fertitta Would Be in Charge

Golden Nugget Atlantic CityOne interesting thing about the possibility of a merger is that Caesars is larger than Golden Nugget, so it would be a “reverse merger” and one in which stock in a private company, Landry’s, would be exchanged for stock in a public company, Caesars. So Caesars would actually acquire Landry’s, but Fertitta would then be the Chairman, CEO, and largest shareholder of the new company.

On CNBC’s “Power Lunch” program on Wednesday, gaming analyst Chad Benyon said that gaming-company valuations are at five-year lows, resulting in a lot of mergers and acquisitions talk.

“It’s been wild times in gaming,” he said. “Stocks in my space are off anywhere between 10 [percent] and 50 percent.”

Thus, companies are cheaper to buy.

Caesars struggled through a two-year bankruptcy process, but has come through it reasonably well. Enough, at least, that has not shied away from exploring acquisitions of its own. And though Fertitta’s company is smaller than Caesars, Landry’s has a major strength in the restaurant and hospitality industry and Fertitta himself is an excellent brand builder.

Tilman Fertitta started his empire as a partner in the first Landry’s restaurant, Landry’s Seafood, in 1980. Willie G’s Seafood & Steaks was next. By 1988, he was the sole owner of both. In 1993, he took the company public, but in 2010, he bought all outstanding shares, making the company privately held once again.

Landry’s isn’t exactly a household name, but its brands certainly are. Among others, Landry’s owns Golden Nugget Hotel and Casinos, Rainforest Café, Morton’s The Steakhouse (I never realized “The” was in there until I looked it up – kind of awkward sounding), Bubba Gump Shrimp Co., and McCormick & Schmick’s Seafood & Steaks. Landry’s also owns a number of other hotels and entertainment facilities.

Analysts Think It Could Work

Credit Suisse weighed in on the merger possibility, saying that it expects continued consolidation in the industry. It explained the rationale behind the potential deal, saying:

(1) Golden Nugget’s casino portfolio is additive and high quality (adds lucrative markets like Houston), (2) Fertitta would be a strong addition to management, (3) Landry’s restaurant expertise and brands are additive, (4) Both companies have strong databases, and (5) Potential marketing and cross-selling synergies around Sports Betting.

JPMorgan analyst Daniel Politzer said in a note to investors, “We assume that Fertitta could help finance the transaction with sale leasebacks at some casino properties (Las Vegas, Laughlin, Atlantic City), and the combined entity would likely divest an Atlantic City property. We assume Bally’s, as it is the smallest contributor.”

The combined company would actually only own Harrah’s and the Golden Nugget in Atlantic City. Caesars does operate Bally’s and Caesars in Atlantic City, but struggling with debt, it sold the two properties to VICI Properties in late 2017 as part of a leaseback deal. Essentially, Caesars sold them to VICI, which, in turn, is leasing them to Caesars so that Caesars can continue to operate them. Caesars did the same thing with Harrah’s Las Vegas in December 2017.

Fertitta, a native of the Houston area, fulfilled a lifelong dream in September 2017 when he purchased the NBA’s Houston Rockets for $2.2 billion. It was notable not just because sports franchise sales are always notable, but because the team is now owned by a company that has gambling interests, something leagues have traditionally tried to avoid. In fact, he was one of the original investors of the Houston Texans of the NFL in 1999 (the team began play in 2002), but had to sell his equity in the team because NFL rules prohibited anyone on the staff from having gambling ties.

Tillman Fertitta isn’t the only Fertitta in the gambling and entertainment industry. His third cousins, Frank and Lorenzo Fertitta, own almost half of Stations Casinos (intra-family competition!). A Stations subsidiary, Fertitta Interactive LLC, was the operator of Ultimate Poker, which was the first regulated online poker room in the United States. It launched in April 2013 in Nevada, but closed just a year and a half later, in November 2014.

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