A merger between two of the casino gaming industry’s largest companies would face regulatory hurdles in Atlantic City and at the federal level, according to experts.
Any deal between MGM Resorts International and Caesars Entertainment Corp. would have to go through a series of checks and balances to ensure it would not create a casino monopoly, industry watchers said following a report Monday by the New York Post.
In Atlantic City, where the two companies operate four of the resort’s nine casino properties, gaming regulators would have to determine whether the merger creates an “undue economic concentration” under the Casino Control Act.
Borgata Hotel Casino & Spa, the most profitable casino in the city, is owned by MGM. Through September, Borgata had reported total 2018 gaming revenue of $591.5 million, which accounted for 27.8 percent of the entire market’s $2.13 billion. Bally’s Atlantic City, Caesars Atlantic City and Harrah’s Resort Atlantic City are all operated by Caesars Entertainment.
Combined, the three properties generated $659 million in total gaming revenue through September, which was 31 percent of the market.
Dan Heneghan, a retired public information officer for the Casino Control Commission and an industry consultant, said there was nothing in the law that specifically prohibits such a merger but the concept of undue economic concentration would be the “principal issue” at play in New Jersey.
Regulators would ask, “Will the acquisition of another property, or properties, give one company too much economic clout in this market?” he said.
“It’s a determination that regulators have to make,” Heneghan said. “They will look at all factors and come to a conclusion.”
The other side of that equation, said Heneghan, is “What’s the impact of saying no?”
MGM was the second-largest casino operator in the United States, based on revenue, in 2017, while Caesars was the fourth-largest.
The size of the corporations would also attract the interest of federal regulators, said Jim Kennedy, a local economist and former chairman of the Casino Reinvestment Development Authority.
Both the Federal Trade Commission and the U.S. Securities and Exchange Commission would look at the potential merger with great interest, he said.
“This (deal) could trigger the antitrust provision” at the federal level, Kennedy said. “It’s used sparingly, but we’ve seen it used from time to time.”
Kennedy added it was “unlikely” the federal antitrust provision would prevent a merger from happening, particularly under President Donald Trump’s administration, which he described as “more liberal” toward deals of this magnitude.
Heneghan said any merger between MGM and Caesars would “take many months” because of the number of jurisdictions in which the two companies operate.
“If they announced tomorrow, it wouldn’t close by the end of the year,” he said.
As for the probability of the deal happening, Kennedy said it was “too hard” to tell.
“I have no idea how real it is,” said Kennedy, “but it’s making a lot of noise.”
Last month, the Caesars board rejected a potential merger proposed by billionaire Tillman Fertitta, who owns Golden Nugget Atlantic City. Last week, Caesars announced the company’s president and CEO, Mark Frissora, was stepping down in February.
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