Going to the Chapel, and...: Fertitta and Caesars

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Going to the Chapel, and...: Fertitta and Caesars

Barclays | Fertitta and Caesars

Aspirational Growth or Risk Mitigation? Maybe Both?

With the expiration of the "Go Shop" period, Fertitta's bid has emerged unchallenged, paving

the way for the consummation of the deal. We understand that Tilman Fertitta had expressed

interest in acquiring Caesars at least as far back as its acquisition by Eldorado in 2019. Currently,

Fertitta Entertainment (Not Covered) generates roughly 68% of EBITDAR from a premium

restaurant empire. Our understanding from historical comments from management is that

restaurants operating in Fertitta's casinos tend to outperform. Acquiring Caesars' 52 casino

resorts gives Fertitta an enormous footprint to expand the existing restaurant portfolio. There

are also expectations that Fertitta could apply Caesars' database analytics across the Golden

Nugget brand and sculpt the combined portfolio into a right-sized collection of competitively

appointed resorts. But this process is likely to take years and billions of dollars in incremental

investment. The Fertitta organization also includes valuable real estate, two amusement parks,

and four aquariums that could benefit from cross promotion across the Caesars property

network. That's the aspirational rationale as we see it.

This acquisition could also be seen as defensive. More bearish investors might argue that more

than two-thirds of EBITDAR for the existing organization is derived from a collection of

steakhouse-intensive restaurants with flattish same-store sales and beef costs near a three-year

high. Since 2019, the segment's contribution to EBITDAR has held essentially flat, but during the

period the restaurant portfolio has downsized by about 74 units or about 15%. This transaction