Caesars Entertainment to Sell SA Stake
Caesars Entertainment Corporation, one of the largest casino and hotel operators in the world, has just announced plans to dispose of its South African assets. On 15 May 2019 the company issued a statement saying that they were already in negotiations with Peermont Hotels, Casinos and Resorts, a hospitality and entertainment firm that is based in Johannesburg, South Africa.
The Nasdaq-listed operator currently holds a 70% stake in Emerald Resort & Casino, which is located Vanderbijlpark, an industrial city close to Johannesburg. They will continue to operate and manage the property until the sale is concluded, which is expected to happen in 2019’s third quarter.
Terms of Sale
Peermont is said to be paying $49 million for the facility, which does equal 70% of its estimated total value of $70 million, while the other 30% will remain in the hands of local partners. The sale includes operation of the current establishment for $39 million, and a 7.9x multiple on the 2018 EBITDA of $6.2 million.
The deal is still subject to approval by relevant regulatory bodies and other government officials, before it is closed. These authorities will make sure that proper conditions, in accordance with the country’s laws, have been met.
The Rewards Programme Factor
Chief Executive Officer of Caesars Entertainment Corporation Tony Radio has explained that his company wants to concentrate on “other strategic markets” outside of South Africa. He said that while the Emerald Resort & Casino property was unique, it was too remote for the operator or its customers to benefit from the Caesars’ Reward Network. Unlike online casinos and bookmakers like Betway and other leading brands that can cater to players all across Africa and beyond, Caesars reach was severely limited by geographical location.
Caesars considers the Reward Network an integral part of what makes them able to deliver such great experiences to players, along with the world-class games, entertainment, service and technology. Officially known as Caesars Rewards, the 4-tier programme awards points to members every time they shop, play or pay for shows, accommodation, food and beverages at any of the facilities within the company’s network.
As customers accrue more points, they graduate from Gold to Platinum, Diamond and finally Seven Stars status. At each new level, they unlock more perks including better hotel rooms, special gaming offers, pre-sale show tickets and discounts in various stores. The points can also be redeemed for playing credits when enough of them have been collected. However due to their location, these benefits were not being enjoyed to their full, and Caesar’s felt that they were not able to provide a premium service to their patrons.
Caesars’ Shifting Focus
The rewards scheme is clearly contingent on strategically placed properties, which the Vanderbijlpark site has proven not to be for the casino and resort giant. However, the plans for a new focus go further than moving out of the South African market.
The sale of Caesars-owned properties on the famous Las Vegas Strip, with Treasure Island owner Phil Riffin very likely to purchase at least some of them, suggests that the company is looking to diversify even more. Reports also abound that they have lost interest in bidding for a 30-year operating licence for the Hellinikon Casino in Greece. In the coming months, industry insiders will no doubt be watching what Caesars does next, in order to understand exactly what kind of “strategic markets” they are planning to develop in or enter.