Critical path to Eldorado-Caesars approval runs through Indiana

After the blockbuster Eldorado Resorts Inc. plan to acquire Caesars Entertainment Corp. for $17.3 billion was announced more than a year ago, who would’ve thought the critical path to approval would run through Indiana?

Most industry observers don’t pay that much attention to Indiana and its 14 casinos scattered across the state. In the United States, Nevada dominates and Atlantic City and Mississippi, with far more industry experience, are the most important centers of casino commerce. Up-and-comers Pennsylvania, New York and Massachusetts have critical stakes. And, if you count tribal gaming, California, Washington, Minnesota, Arizona and Oklahoma are right there.

But Indiana? Not so much. Yet the Indiana Horse Racing Commission, when it meets Monday, could play a pivotal role in how the Eldorado-Caesars deal goes.

Eldorado’s management already got a taste of the Indiana outlook Friday when the Indiana Gaming Commission unanimously approved the transaction, but not until after two hours of testimony and deliberation by commissioners in an online format.

The commission’s conditional approval will require the new company to divest three of its properties and maintain its current level of employment for at least three years. Considering that the new entity will have five operations in Indiana, it’s a substantial requirement.

If Eldorado takes possession of Caesars, it will have Horseshoe Hammond, 20 minutes from downtown Chicago, Caesars Southern Indiana on the Ohio River, Tropicana Evansville, which it picked up in a previous acquisition, and two “racinos” — Harrah’s Hoosier Park and Indiana Grand, the closest gaming property to Indianapolis.

The latter two properties will be part of the discussion when the Horse Racing Commission meets. A commission endorsement looks less than certain.

Unflattering report

Commission Executive Director Deena Pitman issued a 14-page report recently that wasn’t particularly flattering to Eldorado.

“Commission staff remains deeply concerned that (Eldorado) is not truly interested in becoming a true horse-racing partner, as evidenced by its lackluster efforts at other racetracks that it owns or has previously owned,” the report says. “Any conditions imposed by the commission must allow for meaningful accountability to ensure that the commitments that ERI has made are not eroded due to outside challenges or circumstances, or general reluctance to spend additional money on racing.”

Much of the commission report is based on the findings of F. Douglas Reed, a principal in Racing, Gaming and Entertainment LLC. Reed is respected in international racing circles and perhaps best known for his 22-year association with the University of Arizona Race Track Industry Program. Reed was retained by the commission to draft a report, the second time he’s been asked for opinions on operators of Indiana tracks.

Indiana considers itself the gold standard of horse racing in the U.S. — a bold statement considering Kentucky is right across the Ohio River. It’s a massive adjunct to Indiana’s agriculture industry.

Two tracks — at Hoosier Park in Anderson and Indiana Grand in Shelbyville — are big attractions with their attached casinos, which became even more lucrative at the beginning of the year when they were allowed to have table games in addition to slot machines.

The report speaks glowingly of Indianapolis-based Centaur Holdings LLC, which Caesars acquired in 2017. Caesars was viewed as an adequate replacement for Centaur with its commitment to invest money and the development of a friendly relationship with horsemen.

Eldorado’s acquisition of Caesars now represents potentially the second change in management in three years.

‘Limited racing experience’

Several respected horsemen wrote letters to the commission against approval of the transaction, and the Reed report paints an unflattering picture of how Eldorado has operated tracks at Scioto Downs in Columbus, Ohio, Pompano Park in Florida, and Mountaineer Casino, Racetrack and Resort in West Virginia.

“Eldorado has limited racing experience and lacks a deep bench of racing expertise to pull from when adding the existing properties in Indiana,” Reed’s report said.

The report challenged Eldorado’s commitment to fund tracks, even though Eldorado CEO Tom Reeg told the Indiana Gaming Commission Friday that the company would commit $60 million to them.

While it appears a favorable recommendation may not be coming from the Horse Racing Commission, its staff did offer a path to approval — 22 conditions, most of them financial.

Last week in Las Vegas, Reeg had no comment about the conditions.

If Eldorado fails to win regulatory approval Monday, it could make its pending decision on what properties to divest easier. It’s a tough call, since the tracks would be among their best properties in Indiana.

But if Eldorado isn’t wanted, you could see the company run, trot or gallop from the tracks.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.