Sponsorship deals involving gaming operators and major sports leagues are taking the spotlight. Even individual sports stars from the past have joined in, like Allen Iverson with PointsBet and Charles Barkley promoting the DraftKings Sportsbook app in New Jersey.
The Las Vegas Raiders and the Philadelphia 76ers have both entered into a partnership with Caesars Entertainment to promote their brand and sports betting app. Caesars also became the first founding partner of Las Vegas Stadium, which will host the Raiders’ home games.
However, behind the scenes, Caesars Entertainment and MGM Resorts are looking into a possible merger. If the two giants merge, the product will be a hotel and casino behemoth, uniting half of all hotels in Las Vegas and Atlantic City.
MGM Resorts hired the investment bank, Morgan Stanley, to tally up the numbers and check if a merger of this caliber is favorable and what are the options for both companies. The law firm involved in the process is Weil, Gotshal & Manges.
The New York Post reported on the story first, after tapping an industry source, however, the article also noted that there are no offers by either side. This means that the MGM probe may be nothing more than due diligence. The same source claims that the hedge funds standing behind both companies are pushing for the merger to happen. Activist hedge funds collectively hold 25% of Caesars Entertainment. Part of this group is Canyon Partners, who hold major stakes in MGM and Caesars.
Both casino entities have been underperforming in the year to date. MGM Resorts lost 15% of its share values and Caesars lost even more at 25%. If the merger is financially beneficial for both hotel and casino chains, they may get a chance at righting the ship.
To tie in the loop, Canyon Partners’ head of lodging and gaming investments is Chaney Sheffield, who was previously an investment banker at Morgan Stanley. Canyon Partners’ head of investments in gaming and lodging enterprises is pushing the deal to go through, according to the NY Times source. Chaney Sheffield thinks the move will save on overhead and marketing costs for both casino operators.
Together, Caesars Entertainment and MGM Resorts will control a $52 billion network of hotels and casinos. By themselves, MGM and Caesars are worth $30 and $22 billion, respectively. Neither company has commented on the potential deal.
In an attempt to fix its falling stock price, Caesars is negotiating with a handful of potential partners, and they have already declined on an offer by the Golden Nugget. Owner of the Golden Nugget, Tilman Fertitta, reportedly approached Caesars with an offer to merge the two companies with him becoming chairman and CEO of the resulting organization. The benefits for Fertitta would have included consolidating his debt into a larger company and growing his entertainment network of hotels, restaurants, casinos and sports teams.
Caesars, on the other hand, doesn’t have any obvious reasons to sell to a much smaller chain.
That said, Caesars Entertainment is also talking to Wynn Resorts about entering the mix. Evaluated at $18 billion, Wynn Resorts is pushing for a license to build a casino in the Boston-area, which would increase the reach of Caesars even further.
Other potential partners include: