MTR merger would make power player
MORGANTOWN – The proposed merger of West Virginia’s MTR Gaming Group and Nevada’s Eldorado Resorts creates opportunity for growth, and executives with both companies told investors Tuesday that they should expect to see the combined company play a role in the consolidation of the gambling industry.
Eldorado and Chester-based MTR announced plans Monday to create a new company, Eldorado Resorts Inc. If shareholders and regulators approve, the new company will be publicly traded, with Eldorado’s Gary Carano serving as chief executive officer.
The partnership creates “a powerful combination” with a foundation strong enough for the companies to pursue opportunities they couldn’t manage on their own, said Tom Reeg, Eldorado’s senior vice president for strategic development.
In the past, he said, both were limited by size, lack of geographic diversity and balance sheets.
MTR owns Mountaineer Casino, Racetrack and Resort in Chester, Presque Isle Downs & Casino in Erie, Pa., and Scioto Downs in Columbus, Ohio.
Eldorado operates the Eldorado Reno and Silver Legacy, both in Reno, Nev., and Eldorado Shreveport in Louisiana.
“If you think about the future and look at the map, I see a lot of opportunities between Nevada and MTR’s properties in the East,” Reeg said during a conference call. “And you should expect us to pursue other opportunities.”
Already, he said, the companies operate in “five significant markets that generate material results for the bottom line.”
Nevada and Louisiana are historically stable tax and regulatory environments, while Reno has been experiencing recent growth, Reeg said. Shreveport is the largest gambling market in Louisiana, supported by what Eldorado considers attractive customer demographics.
The combined company will have nearly 10,000 slot machines and video lottery terminals, 283 table games and 3,282 hotel rooms. Eldorado employs 4,550 people, and MTR employs 2,848.
MTR President and CEO John Billhimer said none of his company’s existing operations or improvement plans will be affected, and renovations of Mountaineer’s hotel will continue as planned.
Last month, MTR posted a second-quarter profit of $2.4 million, or $0.08 per share on net revenues of $132.3 million. That was up from a loss of $2.4 million, or $0.09 per share, for the same period of 2012.
Billhimer, named acting president in May after Jeffrey Dahl resigned, got the job permanently on Monday. He credited MTR’s gains to the continued strength of Scioto Downs.
Net revenues at Mountaineer, however, were down more than 10 percent in the same period as the Northern Panhandle casino faced more competition for Ohio gamblers.
For the same reason, Presque Isle’s revenues were also down last quarter, by more than 11 percent over the previous year.
MTR can expect more competition from new properties in Ohio, including one in Youngstown, but the company said it believes it maintains a competitive advantage because it’s a full resort, with entertainment venues, fine dining and a hotel.
Billhimer said the merger is good for MTR shareholders, who will have a cash election option of $5.15 per share for up to 5.8 million shares. The remaining shares will be exchanged for shares in the new company.
Eldorado stock owners will be issued 35.6 million shares, or approximately 55 percent of the total shares, in the new company.
The new combined company’s shares will be valued at $5.15 per share. That’s a 44 percent increase over MTR Gaming’s closing stock price on Friday.