Bloomberg has reported that Eduardo Resort [NASDAQ: ERI] has agreed to buy Caesars for $8.7 billion in a cash and stock deal. The deal values Caesars Entertainment Corporation [NASDAQ: CZR] at $13 per share or a total value of $18 billion, including debt. Caesars has been struggling with debt after a failed leveraged buyout left it deep in debt during the 2008 financial crisis. This forced the company to file for bankruptcy for some of its units, and added new shareholders, who have since seem to have sold their shares. Caesar’s major shareholder, billionaire Carl Icahn has been pushing for a sale, and with this deal, his goal seems to have been achieved.
The company’s stock has largely underperformed the S&P 500 and as of Friday’s close, it was trading at $9.99, down by a marginal 0.60%. On its part, Eduardo Resorts has been doing pretty well. It is up by 17% in the last one year, and with this deal, its fundamentals could get stronger. That’s because, it now has Caesars business under its wraps, a factor that could help drive up its revenues going forward. Caesars is a company with some strong fundamentals of its own, in spite of the post 2008 challenges. For instance, its quarterly revenues growth is at 7.40%, painting a picture of growth. In essence, Eduardo resorts is taking over a business and company that could add to its bottom-line.
Eduardo’s books also paint the picture of a company with some pretty solid fundamentals, even without the Caesar deal. Its revenues are growing quite strongly as can be seen in its quarterly revenue growth. The company has a quarterly revenue growth (yoy) of 44.40%. Another indicator to the company’s strong fundamentals is its high profit margins, and an operating margin of 16.73%.
From a look at the daily charts, Eduardo Resorts seems to be on a rebound. On Friday, the stock had a bullish reversal after a sustained bear trend however in pre-market trading today it is indicating a pullback. If this stock pushes above Friday’s high of $52.03, then it would be a signal of a possible bullish run in the short-term. The news of its buyout of Caesar could play a role in sustaining bullish sentiment in the near term and it could positively impact on its growth.