Eldorado Resorts to acquire Tropicana Entertainment in $1.85B transaction
The definitive agreement provides that Gaming and Leisure Properties (GLPI) will pay $1.21B, excluding taxes and expenses, for substantially all of Tropicana’s real estate and enter into a master lease with Eldorado for the acquired real estate and that Eldorado will fund the remaining $640M of cash consideration payable in the acquisition.
The transaction is expected to be immediately accretive to Eldorado’s free cash flow and diluted earnings per share, inclusive of identified expected cost synergies of approximately $40M in the first year following its completion and when giving effect to the lease transaction described below.
Pursuant to the transaction, GLPI is expected to acquire the real estate associated with the Tropicana property portfolio, except the MontBleu Casino Resort & Spa in South Lake Tahoe and the Tropicana Aruba Resort and Casino.
Following the acquisition of the real estate portfolio by GLPI, Eldorado will enter into a triple net master lease for the acquired properties with an initial term of 15 years, with renewals of up to 20 years at the Eldorado’s option.
The initial annual rent under the terms of the lease is expected to be approximately $110M.
Tropicana intends to dispose of Tropicana Aruba Resort and Casino prior to closing.
Eldorado’s net purchase price after the application of Tropicana’s expected net cash on hand and cash flow generated from operations through closing represents an estimated trailing twelve months EBITDA multiple of approximately 6.6x at closing.
Including the $40M of identified cost synergies, the purchase price multiple is expected to be below 5.0x.
The board of directors of each of Eldorado, GLPI and Tropicana approved the transaction, which is expected to close by the end of 2018, subject to receipt of required regulatory approvals and satisfaction of other customary closing conditions.
Eldorado intends to fund the transaction consideration of approximately $640M payable by Eldorado and repay debt outstanding under Tropicana’s credit facility with cash generated from its current operations, proceeds from pending asset sales, Tropicana’s cash on hand, cash flow generated from Tropicana operations through closing and $600M of committed debt financing from J.P. Morgan.
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