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Darren McCammon
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Darren owns ProActive Financial LLC where he provides Financial Planning and Analysis consulting services. In addition to these consulting services, he also manages family investment accounts. Darren's education includes a Bachelors in Economics, an MBA, and a Certificate in Personal Financial... More
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  • 50% Potential Upside On MNTG Shares 7 comments
    May 14, 2014 5:11 PM | about stocks: ERI, CZR, MGM, LVS

    MTR Gaming (MNTG) and Eldorado Resorts are merging into a new entity called ERI.

    The merger was originally scheduled to go through by mid June but there are a lot of state gaming commissions who have to approve it (Nevada, Pennsylvania, West Virginia, Louisiana, Ohio) and it has been delayed. Yesterday the two entities agreed to extend the merger agreement for up to 6 months. ERI, following the mergers, will own casino's and the attached hotels, restaurants, conference facilities, etc. in Reno, Nevada, Shreveport, Louisiana, Erie, Pennsylvania, Columbus, Ohio and Chester, West Virginia; racetracks in Columbus, Ohio, Erie, Pennsylvania and Chester, West Virginia; as well as Racelinebet.com.

    The transaction is pricing MNTG at $6.05. If the merger goes through, MNTG shareholders can elect to receive either cash or shares in the new entity subject to a limit that no more than 20% of all shares can be exchanged for cash. If shareholders electing cash exceeds 20%, then the cash will be pro-rationed among those shareholders electing cash. The remaining MNTG shares will be exchanged on a 1 to 1 basis with shares in the newly merged entity, ERI. The existing Eldorado shareholders will also get ERI shares based on a formula of 6.81 x the previous twelve months EBITDA of Eldorado (equivalent to $6.05 at the time the merger was agreed upon).

    So the implied gain for MNTG if redeemed for cash is 25% (based on today's MNTG share price of $4.85). However, taking shares of the new ERI may be the better option. For comparisons sake, MGM, CZR, and LVS trade at a EV/EBITDA multiple of 11-14. Taking the average of these, 12.5, and discounting it 20% due to ERIs smaller size and likely lower liquidity, we get an expected EV/EBITDA of 10. This implies a potential price of $7.43, a gain of over 50% for current shareholders of MNTG.

    Disclosure: I am long MNTG.

    Additional disclosure: As I am not aware of your personal financial situation, this is not a recommendation for purchase or sale of any security. Please do your own due diligence. MNTG is thinly traded, if you do decide to buy shares you may wish to consider using a limit order.

    Themes: Special Situations, Mergers Stocks: ERI, CZR, MGM, LVS
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Comments (7)
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  • phillipb115
    , contributor
    Comments (13) | Send Message
     
    Thanks for giving me another company to watch!
    15 May 2014, 09:14 AM Reply Like
  • Darren McCammon
    , contributor
    Comments (1868) | Send Message
     
    Author’s reply » MNTG filed an 8k saying the SEC had approved the merger. Still have to wait for all the various state gaming boards to approve but they estimated a Q3 close.
    18 Jun 2014, 12:41 PM Reply Like
  • Darren McCammon
    , contributor
    Comments (1868) | Send Message
     
    Author’s reply » Louisiana approved the merger.
    24 Jun 2014, 02:30 PM Reply Like
  • Darren McCammon
    , contributor
    Comments (1868) | Send Message
     
    Author’s reply » Stockholders approved the merger on the 18th. Ohio approved the merger on the 21st.

     

    I am very surprised that this still trades at $4.84. The average current valuation of publicly traded gaming properties out there is about 10x EBITDA. In reference to a potential ISLE merger Deutsche Bank gaming specialist Carlo Santarelli explained, "...Under our sale assumptions, we believe GLPI could pay 9.0x for ISLE..." So splitting the difference, at 9.5x EBITDA MNTG is fairly valued at $7.15. $6.05 has been offered in cash for up to 20% of all outstanding shares. Trading today at $4.84 there still remains 25-50% upside to the shares.
    22 Jul 2014, 03:20 PM Reply Like
  • Darren McCammon
    , contributor
    Comments (1868) | Send Message
     
    Author’s reply » Eldorado Resorts Completes Merger with MTR Gaming Group

     

    RENO, Nev.--(BUSINESS WIRE)--September 19, 2014--

     

    Eldorado Resorts, Inc. (NASDAQ:ERI) ("Eldorado" or the "Company") announced today that it has successfully completed its merger with MTR Gaming Group, Inc. ("MTR").

     

    The combined company, which has been renamed Eldorado Resorts, Inc., will trade on the NASDAQ Global Select Market beginning today under the ticker symbol "ERI." Effective immediately, MTR Gaming will cease to be a publicly traded company and its common stock will discontinue trading on NASDAQ.

     

    With the completion of the merger, the combined company owns and operates six properties across Nevada, Ohio, West Virginia, Louisiana, and Pennsylvania with a combined 3,300 hotel rooms, 280 table games, 32 restaurants, and approximately 10,000 slot machines and video lottery terminals.

     

    "We are pleased to have completed the merger with MTR and are excited to embark on a new chapter in Eldorado's history," said Gary Carano, Chairman and Chief Executive Officer of Eldorado. "Foremost, we are thrilled to welcome the MTR team into the Eldorado family. With a diversified platform of gaming assets across the United States and a strengthened balance sheet, we believe Eldorado is well positioned to take advantage of future growth opportunities in the industry. In addition, we remain committed to providing a premier guest experience to our valued customer base as well as creating long-term value for our stockholders."

     

    "With the combined portfolio of Eldorado and MTR, we are better prepared to face an increasingly competitive regional gaming landscape," said Joseph L. Billhimer, Executive Vice President and Chief Operating Officer of Eldorado and former President and Chief Operating Officer of MTR Gaming Group, Inc. "We are excited to join Eldorado and want to thank both the Eldorado and MTR teams, our customers, stockholders and various regulatory bodies for their invaluable support throughout the merger process."

     

    Agreement Information

     

    As previously announced, Eldorado, MTR, Eldorado HoldCo LLC and certain of their affiliates entered into a merger agreement, pursuant to which Eldorado HoldCo LLC and MTR became wholly-owned subsidiaries of Eclair Holdings Company, which was renamed "Eldorado Resorts, Inc." Under the merger agreement, MTR stockholders were entitled to elect to receive one share of Eldorado common stock or $6.05 of cash for each share of MTR common stock, subject to a cap of $35 million of total cash consideration. As previously disclosed on August 13, 2014, the cash election was oversubscribed. Accordingly, approximately 24.6% of the shares of MTR common stock for which a cash election was made will be distributed cash as merger consideration, and approximately 75.4% of the shares of MTR common stock for which a cash election was made will receive shares of ERI common stock as merger consideration.

     

    Former members of Eldorado Holdco LLC will own approximately 50.2% of Eldorado common stock and the former stockholders of MTR will own approximately 49.8% of Eldorado common stock, subject to a post-closing adjustment to the number of shares issued to former members of Eldorado HoldCo LLC (as further described in the merger agreement).

     

    Leadership and Organization

     

    Gary L. Carano has been appointed to serve as Chairman and Chief Executive Officer of Eldorado. Thomas Reeg now serves as President of Eldorado, and Joseph L. Billhimer, former President and Chief Operating Officer of MTR Gaming, serves as Executive Vice President and Chief Operating Officer of Eldorado. Robert M. Jones now serves as the Company's Executive Vice President and Chief Financial Officer.

     

    The members of the Board of Directors of Eldorado are Gary Carano, Frank Fahrenkopf, Jr., James Hawkins, Michael Pegram, Thomas Reeg, David Tomick and Roger Wagner.

     

    Advisors

     

    Milbank, Tweed, Hadley & McCloy LLP served as legal counsel to Eldorado Resorts. Macquarie Capital served as MTR Gaming's exclusive financial advisor, and Stevens & Lee, P.C. served as legal counsel to MTR Gaming.

     

    About Eldorado Resorts, Inc.

     

    Eldorado Resorts, Inc. (NASDAQ: ERI) is a casino entertainment company that owns and operates six properties in five states, including Eldorado Resort Casino and Silver Legacy Resort Casino (a 50/50 joint venture with MGM Resorts International) in Reno, NV; Eldorado Resort Casino in Shreveport, LA; Scioto Downs Racino in Columbus, OH; Mountaineer Casino Racetrack & Resort in Chester, WV; and Presque Isle Downs & Casino in Erie, PA. For more information, please visit http://bit.ly/1v0pzyK.
    19 Sep 2014, 12:45 PM Reply Like
  • Darren McCammon
    , contributor
    Comments (1868) | Send Message
     
    Author’s reply » I took the $6.05 in cash offered for a 25% gain on the shares of ERI which were redeemable; however, instead of selling the rest of the shares I decided to keep them.

     

    ERI seems one of the cheaper equities in the gaming sector. Additionally, it has potential possibilities for improvement. Low gas prices and an improving economy put more money in "locals" pockets which can be spent on gaming as well as encouraging mini drive vacations and long weekends away. This should help regional gaming operators relative to the large destination resorts. Second thanks to the merger, ERI has a decent opportunity to refinance debt to lower rates this year.

     

    ERI is up 9% today on significantly higher than average volume. Their is no news that I can see yet; however, their earnings report is due.
    19 Feb, 04:59 PM Reply Like
  • Darren McCammon
    , contributor
    Comments (1868) | Send Message
     
    Author’s reply » I did find something. There's been 3 13G filings in the last couple days. PAR capital, Laffitte Capital and NGA Holdco (a Carano/Reeg management investment vehicle) all filed 13G's showing more than 5% ownership in the last couple days. Also of note, but not recent, 4 insiders including Reeg bought more than 50k shares back in November in the $4.30 range.
    19 Feb, 05:36 PM Reply Like
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