The Art Of A Merger: Top Gaming Companies That Should & Shouldn’t Form Alliances

Written By Nicholaus Garcia on July 15, 2020 - Last Updated on July 6, 2020

Mergers and acquisitions can be tedious. It takes a very dark soul and a monumental amount of patience to make a series of billion-dollar deals exciting to read. Dollar amounts, stock shares and board seats get thrown around like mashed potatoes in a food fight, and just like in a food fight, things can get messy.

Instead of boring you with SEC filings and complex tax structures, PlayUSA will walk you through casino mergers — from one actually happening to “almosts” and some that are purely hypothetical.

Coming real soon: Caesars Entertainment and Eldorado Resorts

I’m no financial or real-estate analyst, and I’m not going to try to be, but I know a significant acquisition when I see one. Caesars Entertainment, whether through ownership percentage, lease agreements or direct management, is associated with 37 casinos in the US alone, along with properties in Canada, Dubai, England, Egypt and South Africa.

Eldorado Resorts which owns 21 casinos, is acquiring Caesars for $17.3 billion. That’s the financial equivalent of two Jerry Joneses, whose net worth hovers around $8 billion.

Even though the Federal Trade Commission cleared the merger on June 26, there are still some details being ironed out. It’s subject to approval by additional gaming entities in other states, including Nevada and New Jersey. Just days ago, the Indiana Horse Racing Commission voted to approve the merger with several stipulations, including Eldorado selling three of its Indiana casinos.

But when it’s all said and done, that will be 55 casinos controlled by a single entity, making this the largest casino merger in history.

Eldorado will have a stronghold in every market and become the top operator in the gaming industry.

What could have been: DraftKings and FanDuel

Three years ago, the gambling industry almost witnessed the creation of a super team. When DraftKings and FanDuel announced they were exploring the idea of a merger, it felt similar to the day Chris Paul was expected to join Kobe Bryant in Los Angeles. Much of the sports world gasped (and rest assured, the gaming industry has a similar response about the two daily fantasy sports (DFS) companies).

But as we now know, the trade was vetoed by then-NBA commissioner David Stern, crushing the championship dreams of the Lakers Nation. A similar situation would unfold with the Federal Trade Commission (FTC) and the DK/FD deal. According to the New York Times, the FTC said the merger would create a company that controlled more than 90% of the US market for paid daily fantasy sports.

Fast-forward to 2020, and it’s hard not to argue that DraftKings and FanDuel are the two most prominent names in the sports betting industry.

It can be argued that FanDuel is no longer just a DFS company, but rather the most successful pioneer in a new sports betting landscape. Following the repeal of the Professional Amateur Sports Protection Act (PASPA), FanDuel managed to impressively leverage its extensive user base, partner with a few casino operators and launch a competitive sports betting product.

DraftKings took a page from Mike Trout’s book and transformed itself into one of the premier sports betting operators in the country. Since the death of that proposed partnership back in 2017, DraftKings has achieved several things, including becoming a publicly traded company. Like FanDuel, it launched sportsbooks in some of the biggest states in the US and secured lucrative deals with casino operators and sports leagues.

Initially trading at $15/per share, DraftKings stock has soared as high as $40/per share, making it one of the hottest investments of 2020. During a public offering in April, the company sold an additional 46 million shares, and don’t forget, a few shareholders are some of the biggest names in sports.

DraftKings shareholders include:

  • James Dolan — Owner, New York Knicks and Rangers (Madison Square Garden)
  • Robert Kraft — Owner, New England Patriots (Kraft Holdings)
  • Jerry Jones — Owner, Dallas Cowboys (Legends Hospitality)

What makes this the biggest “what if” of the gaming world is its monstrous potential. Much like the Chris Paul trade, FanDuel and DraftKings were evolving from household names in the DFS world to significant players in the gambling space.

Ten months after calling off their merger, the US Supreme Court would go on to strike down PASPA and pave the way for legal sports betting across the country. We may never know what DraftDuel, FanKings or DKFD Sports may have looked like, but judging by where they are now, they would have been holding up the sports betting title for years on end.

No, please no! Las Vegas Sands and Wynn Resorts

There’s been talk about a hypothetical merger involving two of the oldest casino operators in the US. A partnership of this magnitude would reek of tradition. Think always having to watch Alabama win a National Championship, but they have to play Notre Dame in the title game each year.

Las Vegas Sands and Wynn Resorts have had their fair share of controversies. Though that should not diminish their reputation or contributions to the industry, they should never join forces. People hate Alabama and Notre Dame because they are always so damn good and because they have been around for what feels like an eternity.

Sheldon Adelson, the owner of LVS, is the gambling industry’s version of Nick Saban, a cutthroat, no-BS gaming czar who knows how to get results—not to mention, people really dislike Saban. Then there is Wynn Resorts, which in my opinion is the Notre Dame of casinos. People hate Notre Dame but can’t help watching them on Saturdays. The same goes for Wynn Resorts — when the company makes a move, the gaming world stops to watch.

Look, I’m a hopeless romantic when it comes to tradition. Every time Chief Osceola plants his spear at the 50-yard line before Florida State home games, I’m 10 years old again, watching football with my grandfather. The same goes for walking into a casino. There is no substitute for hearing the sound of slot machines and seeing red dice hit the back of a craps table; it’s how things are supposed to be.

But unfortunately, things change. Adelson has fought to halt the spread of online casino gaming, a battle he is slowly losing. The company has been relatively steady, trading at $74/per share pre-coronavirus but falling as low as $46/per share amid COVID-19. Wynn, on the other hand, was tangled in controversy following the removal of Steve Wynn as CEO.

With nine of the most lucrative properties in Las Vegas and Macau, Adelson’s casino portfolio is among the best. It’s about quality, not quantity with these companies. Wynn Resorts also has six casinos spread across Vegas, Macau and a multimillion-dollar property in Boston. Together, they would corner the market in China and possess lucrative properties in Vegas.

There have been many small blips in the rumor mill about the two companies combining over the years, but there’s almost zero chance it will happen.

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I wish! FanDuel and Penn National Gaming

I hate it when a team is on top for too long—the exception being Florida State, so call me a hypocrite if you wish. But Alabama, the New England Patriots and the New York Yankees all had to go. And there is nothing I enjoy seeing more than the fall of a dynasty.

With that premise in mind, although young, DraftKings Sportsbook has the look and feel of a future dynasty. What better way is there to topple competition than to bring together its two biggest rivals?

Penn National Gaming may not be a household name to average joes, but the company does hold significant clout in the gambling industry. It recently acquired a 36% interest in Barstool Sports for a lump sum of $136 million. In doing so, it became younger, more popular and secured a cultlike following. The company will gradually transform all its existing online and retail sportsbooks into Barstool Sportsbooks and become a true sports betting force.

Pairing Penn National’s experience with a youthful brand like Barstool and then bringing along FanDuel Sportsbooks’ extensive user base — talk about firepower. That’s like putting Lebron James on the Boston Celtics or Tom Brady on the — surprise surprise — Tampa Bay Buccaneers! For reference, the average player age for the Buccaneers in 2019 was 25 years old.

A Penn National/FanDuel merger would have the tools necessary to topple DraftKings. Penn National has 41 properties in 19 jurisdictions. FanDuel has deals with MLB, NHL and the NBA, as well as sportsbooks in hot market states like Colorado, Mississippi, New York and Pennsylvania.

But then again, is sacrificing one sports betting dynasty for another really in the best interest of consumers?

With the exception of Caesars and Eldorado, all of these mergers are simply hypotheticals, as stated. They are discussion topics to get the blood boiling and the mind thinking, “What if?”

Nicholaus Garcia Avatar
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Nicholaus Garcia

Nick has had stints in Chicago and Washington, D.C., writing about politics, financial markets, and sports betting. He graduated from Texas Tech University and completed his master's degree in journalism at Columbia College Chicago.

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