Shares of regional gaming company Eldorado Resorts Inc (ERI) jumped as much as 20.9% in trading Monday after announcing some large acquisitions. At 11:55 a.m. EDT shares were still up 17.9% on the day and had recently hit their daily high.
Eldorado Resorts agreed to acquire Grand Victoria Casino in Elgin, Illinois for $327.5 million in cash. The price is nine times trailing adjusted EBITDA and management said they expect to reduce costs enough to make the price six times adjusted EBITDA within 18 months.
The bigger deal was an agreement to buy Tropicana Entertainment for $1.85 billion. The company's real estate will be sold to Gaming and Leisure Properties (GLPI 1.85%) for $1.21 billion with the remaining $640 million coming from Eldorado's balance sheet. The price is estimated to be 6.6 times EBITDA based on projected cash flows after closing.
To fund these acquisitions, Eldorado has $600 million of committed debt financing.
Eldorado continues to aggressively expand its gaming empire and it's using the REIT structure of Gaming and Leisure Properties to fund a big part of the Tropicana deal, reducing its own outlay. The prices in the six to seven times adjusted EBITDA range are also extremely attractive and should drive increased cash flow to the business. These are great acquisitions for the company and the market's reaction shows how excited investors are about the deal.