Good morning, and welcome to the Eldorado Resorts Conference Call to discuss this proposed combination with Caesars Entertainment. Today's call is being recorded. A presentation is available on Eldorado's website, www.eldoradoresorts.com, which management will reference on this conference call. Eldorado's forward looking statements policy can be found on Page 2 of the presentation, along with materials that have and will be filed with the Securities and Exchange Commission, which include a registration statement containing a joint proxy statement and press practice. Eldorado encourages you to read these materials if and when they become available because they contain important information and about the proposed transaction.
At this time, I'd like to turn the conference call over to our host, Eldorado Resorts' Chief Executive Officer, Tom Rigg. Thank you. You may go ahead.
Thank you, and thanks, everyone, for joining this morning. We're super excited to be here to announce that Alvarado is acquiring Caesars for $12.75 a share. The deal will create the largest owner and operator of U. S. Gaming assets with around 60 properties in 16 states.
It combines unique strengths from each company, our decentralized operating focus and ability to squeeze more from operations, Caesars brings incredible strip presence and the Caesars Rewards players program, which is the best in the business. So we're very excited about that. We think we're anticipating $500,000,000 in 1st year synergies. So near term, high conviction, You should expect the cadence to be similar to past transactions that we've done. So within that 1st year, you should expect it to be weighted to the first half of that.
We've got a proven track record through multiple acquisitions of exceeding our announced synergy targets, and we'll get into where those synergies are coming from later in the presentation. But I see a path here to $4,000,000,000 to $4,500,000,000 EBITDAR company in the combined portfolio. We'll talk about our real estate transaction with VICI, which is we think innovative using only assets that were either already leased or subject to a call with Caesars already will come out of this about fifty-fifty owned to lease, which is not dissimilar to where Caesars is coming in. Both companies are finishing up substantial CapEx cycles. Caesars primarily with in their Vegas room refresh that was well over $1,000,000,000 We're finishing up Reno and Blackhawk.
With this deal expected to close in the first half of 2020, both companies should be in free cash flow harvest mode at that point. I expect that the combined company should do in the neighborhood of $1,500,000,000 of free cash flow per year. There'll be about $155,000,000 of shares outstanding. So we should be in the neighborhood of $10 per share of free cash flow. I'm personally excited that Tony Rodio, CEO of Caesars, is both here on the call and at Caesars during the transition period.
We recently completed the Tropicana Entertainment acquisition about 9 months ago, and Tony was in the same role in Tropicana during the transition and just did a phenomenal job and made it a seamless transition for us. So we could not be more thrilled that Tony is the guy that we're going to work with here to transfer these assets to us. So we are incredibly excited. This is an iconic brand. It has iconic brand names Caesars and Horseshoe and Harrah's and World Series of Poker.
It's really a level of property and brand that we have not had the great fortune to control and now we will. And with that, I'm going to turn to Tony for remarks from the Caesars standpoint.
Thank you, Tom, and good morning, everybody. We're also excited to announce this agreement, which provides Caesars Entertainment shareholders with substantial and immediate value as well as the opportunity to participate in the significant upside potential of the new company. As you know, our Board of Directors conducted a thorough evaluation of the past by which we could enhance value the most and position the company for long term success. We concluded that this transaction is the best way to accomplish those objectives. The transaction brings together 2 companies with rich histories, strong brands and loyal customer bases to create a new leader in gaming and entertainment.
With an unparalleled portfolio of approximately 60 properties across 16 states, the combined company will be well positioned to deliver exciting and innovative experiences guests, providing a rewarding workplace for our employees and create value for shareholders. As Tom mentioned, I'm quite familiar with Eldorado Risk Management team having worked on the Tropicana transaction with Tom last year. Eldorado is highly respected with strong leadership, a track record of successfully integrating acquisitions and a complementary culture that fosters the growth and development of its team members. I'm confident that combining Eldorado's growing highly successful platform of regional gaming properties with our best in class Caesars Reward program, iconic Las Vegas Vegas assets and attractive regional portfolio will create a strong new competitor with the best possible platform for long term success in the industry. A key component, as Tom has mentioned, of the transaction are the potential synergies that can be realized.
From my perspective, the synergies described as part of the transaction are achievable. In the 6 weeks since I've been here, I've identified opportunities to reduce corporate costs on a standalone basis. Additionally, there are opportunities that will be created by combining the 2 companies, including the reduction of duplicative structures and also an increased purchasing power. And then there's also the substantial revenue opportunities associated with integrating Caesars Rewards into the Eldorado properties. I look forward to continue to lead Caesars over the coming months and collaborating with the Eldorado team to ensure a smooth approval and closing process.
With that, I'll turn it back to you, Tom.
Thanks, Tony. For those of you that may not have found it yet, there's an investor presentation on our website. For those following along, I'm going to start going through that on Slide 3, transaction overview. Eldorado is going to acquire Caesars. Total consideration is $17,300,000,000 comprised of $7,200,000,000 in cash and approximately 77,000,000 shares of Eldorado stock.
We'll assume all of Caesars outstanding net debt. The purchase price of Caesars is $12.75 per share, dollars 8.40 in cash, 0.0899 shares of Eldorado common stock for each Caesars share subject to the proration and the merger agreement. Post transaction, Eldorado shareholders will own about 51% of the combined company. We're intending to leave the Caesars debt structure in place. We've got $3,200,000,000 of real estate financing with VICI that I'll go through shortly.
We announced $385,000,000 of asset sale proceeds. There's $2,400,000,000 of underwritten financing to CRC and $4,800,000,000 of underwritten financing to Eldorado. Brett will go through that momentarily. In terms of management, Gary Carano, our Chairman and myself, Anthony Carano, our Chief Operating Officer Brett, our CFO Ed Quatman, our Chief Legal Officer, will lead the combined company. I would say those of you who know us, know we have a best athlete culture.
If you look at our senior management team, there are many examples of people who've come to us through acquisitions. We certainly expect that to be the case with Caesars as well. With as far as the Board, it will be an 11 member Board, 6 will come from Eldorado, 5 will come from the Caesars Board. We're going to retain the Caesars name for the corporate entity. Clearly, the iconic brand in the gaming space.
This was a very easy decision for us. Corporate headquarters will be in Reno, but we intend to maintain a significant presence in Las Vegas as well. There are voting agreements signed by both Icon Enterprises and the Corano Antony Recreational Enterprises, so both largest shareholders signed up to support the transaction. Both shareholder bases will need to approve the transaction, and we expect to close in the first half of twenty twenty. The transaction with VICI will provide us with $3,200,000,000 of after tax proceeds.
Caesars brings with it a large NOL balance and we were able to preserve that. We'll use some of it in the real estate sale transaction, but we don't expect to be a cash taxpayer till 2022 in the combined company. The $3,200,000,000 comes at an aggregate multiple of 12.7x and it includes the deal includes the following. They are going to acquire the real estate that was subject to the call agreements, Harrah's Atlantic City, Harrah's Laughlin, Harrah's New Orleans. That will be the rent there will be $154,000,000 at 11.7x for total proceeds of $1,800,000,000 Recall that those call options were a 10x multiple of $120,000,000 of EBITDA.
So we amended those. On the Caesars Palace and Harrah's Las Vegas leases, we're selling a combined increase in rent of $98,500,000 at 14.25x. That's the remaining $1,400,000,000 of the $3,200,000,000 of proceeds. Those two leases will collapse into a single Las Vegas strip lease. We added in order to reload the growth, that the call options represented the future growth that the call options represented for VICI, we added a put call option on the Centaur assets.
So starting January 1, 2022 and extending for 3 years, the Centaur Real Estate is subject to a 12.5x put, a 13x call at 1.3x interest coverage. So rolling that forward, that would give us the ability to put to VICI, the Centaur Real Estate at over $2,000,000,000 and maintain the OpCo. Recall that Caesars sold or I'm sorry, bought the entire Centaur asset portfolio, including the OpCo for $1,700,000,000 just recently. So we're excited about that both for the value it represents, but also it's an additional hedge on downside risk economically. This is $2,000,000,000 plus that we'll have access to in addition to our revolver availability that Brett will go through.
We also granted rights of first refusal for whole asset or sale leasebacks on 2 Las Vegas Strip properties and Horseshoe Casino Baltimore. We've made no decisions yet on when and whether we will sell those properties. You should expect us to for there to be some asset sale activity between now and closing outside of what's covered in the ROFRs, but those are added to the VICI call or the VICI transaction as well. And what I would say is this was as complex a negotiation transaction as I've been involved with. You may notice that the $12.75 per share was based on our VWAP as of May 23.
That's when the price was agreed to. If you roll forward to Friday's close, Caesars is actually getting a little over $13 per share, but that's how long it took to get through all the documents here. And I'd also make the point, just so people are aware, I think all of the articles about fighting over price and someone demanding something and all of that all happened after May 23 when the price had already been agreed on. So the deal creates, as I said earlier, the largest owner operator, U. S.
Gaming Assets, were 60 properties. As I said, I think the portfolio ends up at $4,000,000,000 to $4,500,000,000 of EBITDA. The next largest is 10 in terms of properties at 37, MGM in terms of property level EBITDAR at $2,500,000,000 The map is we are extremely well diversified. The positioning on the strip is important to us. This is really a piece that we've not been able to have for our network.
Caesars has spent about $1,200,000,000 in CapEx. And by the time we close $1,200,000,000 in CapEx on room renovations on the Strip in the last four and a half years, by the time we close, 95% of their Vegas Strip rooms will have been touched. So we'll have a combined portfolio of over 50,000 rooms, over 4,000,000 square feet of gaming, about 300 food and beverage outlets, just a huge company. It's also from in terms of the regional standpoint, our regional revenue will increase to almost $7,000,000,000 We add about $10,000,000 of our loyalty club members to the Caesars Reward network. I think many of you who follow Caesars know that plugging properties into the Caesars Reward program is a profitable endeavor.
If you look at what's happened with Centaur since the close in July of 2018, revenue has been I'm sorry, EBITDA has been growing in the mid teens to low 20%. Every 1% or 100 basis point increase in revenue in the Eldorado network will flow through over $20,000,000 of EBITDA to the combined company. So we think this is a key benefit of the transaction. If you look at our track record, we have a long history of acquiring properties, decentralizing the operating model and driving improvement in EBITDA and EBITDA margin. If you look at us in 2014 through end of 2018, we increased our EBITDA margin by over 50% to over 25% despite having one of the highest pro form a gaming tax rates in the industry.
In this particular transaction, we've identified $500,000,000 of near term synergies. Caesars on a centrally managed basis has more than $600,000,000 of cash operating costs, has over 3,200 people. Eldorado as a contrast has about 200 people $40,000,000 of centralized cost. So the opportunities here are in that structure, reduction in public company costs, the revenue uplift from plugging us into Total Rewards, procurement, insurance, all the scale, purchasing volumes, savings. The $500,000,000 includes $0 in terms of management of customer acquisition spend that has been extremely fruitful for us across prior acquisitions.
Really, this is about delivering the Caesars network back to the property level. Caesars not only was the gold standard as a brand, it has incredible people that work in the organization. And at the property level, we believe have been handcuffed a bit in terms of having to deal with a large centrally managed infrastructure, we're going to deliver that back to the property level. We are firm believers that we make our money at the local level. We need to empower those people to make decisions within our operating framework, but really let them run.
And that's been what has helped us deliver the results that we've delivered in past acquisitions, and we think that's a key reason that Caesars to date has in recent history has had the issues that it's had. So with that, I'm going to turn it to Brett for specifics on the financing.
Thanks, Tom. We know that many of you have analyzed and commented as to how this debt structure would work in a combination. And we're happy to say that Caesars' existing debt structure can remain in place through this transformative transaction. In terms of the nuts and bolts, the financing we've assembled involves the long awaited combination of CRC and SEOC, which you can see in the orange box at the bottom of the org structure on Page 10. This combination of 2 of the best credits in the gaming industry allows us to free up just under $1,000,000,000 of proceeds while leaving CRC SEOC very modestly levered.
As Tom discussed, we will close on $3,600,000,000 of tax free real estate and asset proceeds alongside a slight increase to Eldorado's existing debt, which will be refinanced in whole. From a consolidated perspective, we expect to close with roughly $10,000,000,000 of secured debt and $3,500,000,000 of unsecured notes. Our closing liquidity will consist of over $1,000,000,000 in cash and $2,000,000,000 of undrawn revolver capacity. Our nearest funded debt maturity will be in December 2024, leaving us with ample runway to execute our integration with Caesars alongside years of free cash flow generation to pay down debt. As you all know, Tom and Eldorado have been stewards of the balance sheet for many years, and we are excited about how well positioned we will be from a credit and liquidity perspective when we close.
Back to you, Tom.
So our final slide for those of you who are who've been with us for a while, you're familiar with this, but I'm sure given Caesars' position in the market, there are a lot of people that are finding us for the first time. If you look at the chart on Page 11, we have been Slide 11, we have been at what we've been rolling up assets since the end of 2014. What we're doing here is exactly what we've been doing in the past. Frankly, this is this fits this checks all of the boxes. It's got the centrally managed costs that we unravel.
It's got the customer acquisition opportunity. In particular, this as a new piece, this has the revenue piece of plugging into Caesars Rewards, which is going to be powerful for the combined organization with bringing the Eldorado assets in. We have exceeded our synergy targets, both from a timing and actual amount in every transaction that we have done as a public company. We've demonstrated the scalability of our operating and financial model. We started with 2.5 properties in 2 markets in September of 'thirteen when we struck the deal with MTR Gaming that subsequently closed in September of 'fourteen.
We have a keen focus on deleveraging in this transaction, presuming there is $500,000,000 of cage cash necessary, based on the deal that as presented to you today, we close at about 5.8x gross lease adjusted leverage. There will be some smaller divestitures that you should expect to be announced and closed between now and closing or shortly afterward that will allow us to close right in the mid-5s on a gross lease adjusted leverage basis, We should be generating in the neighborhood of $1,500,000,000 of free cash flow a year. We are going to make decisions on the combined portfolio and assets that we may divest beyond what's happening in front of the transaction. But if you add all that together, I would expect that we're going to pay down in excess of $5,000,000,000 of conventional debt in the 1st 24 to 36 months post transaction, which would put our leverage below 4x as a combined company. I look at this as the key takeaways for me back when I was in the investor shoes are we're buying we're putting this together, presuming that we execute this as a $1,500,000,000 neighborhood free cash flow company with 155,000,000 shares outstanding, so about $10 per share of free cash flow on a combined basis.
And again, presuming we execute on those numbers, we will have bought the Caesars brand, the Strip position, all of their assets across the country, Caesars Rewards, all of their brands, World Series of Poker, for a multiple inside 7x EBITDA. So we are absolutely thrilled to be here. We thank all of our everyone who worked on this transaction. This was extraordinarily complex with a special thank you to the VICI team for working through the real estate documents that were incredibly complex coming out of the Caesars bankruptcy a few years back. All of our employees that have put in the work to put us in this position, the shareholders that have believed
in us back from when
we were $4 a share. This is a spectacular day for us. We're excited to be here and I'll turn it to the operator for questions.
Great, thank you. At this time, we will be conducting a question and answer session. Our first question here is from Carlo Santarelli from Deutsche Bank. Please go ahead.
Hey, guys. Thanks and congratulations to everyone on the call. If I could just start, could you guys talk maybe a little bit about the competition or other potential parties that could have been involved in the transaction and how potentially a competitive environment led to some of the considerations in the transaction?
I would say we read the same things that you read in the papers. We were negotiating on a bilateral basis with Caesars all along. We know that they were having other conversations as well. And we were focused on what could we do with the assets, what are we creating the purchase at, and we were thrilled with the outcome.
Understood. And Tom, you mentioned a couple of times in the prepared remarks that the talk of further asset sales from here. As you think about the nature of those assets and maybe how you think holistically on a pro form a basis, post those sales you want the company to look from an owned leased EBITDAR perspective. Are there any kind of guidelines that you're going by at this point?
We're at fifty-fifty post transaction, and we'd like to stay there for the foreseeable future.
Our next question is from Shaun Kelley from Bank of America. Please go ahead.
Hi, good morning everyone and congratulations. For Tom or Brett, if you guys could just comment a little bit more on I think the free cash flow becomes a really important part of the story. And any color you could provide on some key elements to that bridge, be it sort of incremental cost of debt or your thought around, I think you guys mentioned a couple of times some potential tax implications here that seem to be advantageous. So any just key things we should be aware of to help bridge to the numbers that you cited, Tom, the $10
Yes. You should be presuming $1,200,000,000 of rent expense, dollars 700,000,000 of interest expense, cash interest expense, dollars 600,000,000 of maintenance CapEx, 0 taxes till 2022.
Great. That's super helpful. And then just in terms of sort of boiling down on timing, do you think that there will be any required divestitures and things that are going to be overlaps that are going to be necessary as conditions to close? Or are these things that you'd like to do just more preemptively to prune the portfolio and access cash?
On the former, we start that process this week in terms of working through the FTC process. So too early to say what might be necessary there. We know there are assets that we intend to prune. And in a couple of cases, that likely helps the FTC argument.
Understood. Last question would just be on, you were pretty explicit that your typical customer acquisition, I guess, calling of expenses is not part of your contemplated $500,000,000 or identified $500,000,000 of initial synergies. If you were to run sort of more of your standard playbook or your based on your experience at Eldorado thus far, how much could people be envisioning or could we be thinking about would be sort of an opportunity maybe over several years for the marketing side of the equation if you were able to optimize that like you've done so far with Eldorado? And that's it for me.
If you look at our past acquisitions and the results from there, that piece of our synergies tends to end up about 30% to 40% of the total number.
Great. That's it. Thank you very much.
Our next question is from Dan Paleter from JPMorgan. Please go ahead.
Hey, good morning, everyone. Congratulations on the transaction. So you mentioned some asset sales could happen between now and the closing. Can you maybe talk about some of the markets we should be thinking about possibly possible regulatory overlap? And in conjunction with that, how do you think about further asset sales with respect to Las Vegas Strip in given the broader hub and spoke model?
Thanks.
So you can Dan, you can see the map where we have overlap, where you might be thinking an asset would be a candidate for sale. I don't want to talk about any specific assets that might be for sale. In terms of the strip, we're going to do the analysis of are we better off keeping what's on the strip and yielding the rooms having greater competition for the rooms because we're putting our portfolio into the Caesars Rewards system. But as I sit here today, I'd tell you, I think that there's more strip exposure than we would need to accomplish our goals with our regional database. So I would expect that we would be a seller of a strip asset, but that decision has not been made.
All right. And then just on Kraw Icon Stripes Gate. Has he agreed not to sell for a period of time? Or what are the are there any restrictions there?
His voting agreement will be filed with all of the other documents. You'll be able to read
that. All
right, great. Thank you so much and congratulations.
Our next question is from Barry Jonas from SunTrust. Please go ahead.
Good morning and congratulations. Just a couple of questions. As we think about the $500,000,000 in year 1 synergies, first just to confirm that's not run rate by year end. That's what you expect to achieve. And then if you sort of think about the different buckets from a percentage basis, any color you can give there?
I'm most interested in how much revenue synergies you're sort of thinking about in that 500,000,000
dollars So we see as I said on the $500,000,000 we expect to realize those we'd expect to hit that target during the 1st year. We expect that the cadence will be similar to past acquisitions where we ramp up very quickly immediately in terms of synergies. On the revenue side, as I said, every 100 basis points of revenue increase is over $20,000,000 of EBITDA to the combined company, I think it's reasonable to believe that you could see a mid single digit lift in the Eldorado portfolio if you look at past acquisition or past Caesars results.
Got it. And then just in terms of Caesars strategy, I think there was international was in the mix. Specifically, they were focused on Japan. How do you see sort of NewCo's focus on international development or expansion opportunities?
We've not made firm decisions on international yet. I would tell you that you know us as a company that's been domestically focused and focused on blocking and tackling. So the opportunity internationally is going to be have to be frankly stupendous for us to be running in that direction, but no firm decisions have been made at this point.
Got it. Thanks so much guys and congratulations again.
Our next question is from Thomas Allen from Morgan Stanley. Please go ahead.
Hey, good morning. Congrats on the transaction. Just in terms of sports betting, both companies had a number of different partnerships. How are you thinking about that going forward? Thank you.
Yes. We bring the William Hill and Stars Group Access Partnerships, Caesars has a plethora of sports partnerships, including league partnerships, team partnerships, ESPN, we see them all fitting together. We would see William Hill and TSG rolling into access deals across the Caesars portfolio to the extent that they're not already offered in our portfolio. But we think the opportunity in sports betting in the combined company is as good as there is out there at this point.
Helpful. And then can you just
talk a little bit more about the rationale of keeping the headquarters in Reno versus shifting to Vegas where you have more exposure?
I mean, it's really about who's running the executives that are running the company are all based in Reno. Frankly, Reno to Vegas flights are almost like a bus schedule in terms of timing and it's 40 minutes. We will keep a presence in Vegas. We'd expect to see the people in Reno to be spending a fair amount of time in Vegas. But Reno is the home of this company.
It's where it was born, and that's where it's going to remain.
Helpful. Thank you.
Our next question here is from Jared Shojaian from Wolfe Research. Please go ahead.
Hey, good morning, everyone. Thanks for taking my question. Tom, during past M and A transactions, you've talked about tax adjusted margins at the acquired company. I know Caesars is a little bit different with the Vegas exposure, but can you just talk about how the legacy Eldorado margins compare to Caesars
on a tax adjusted basis? I'd get at that by if you look at estimates for this year, I think consensus has both us and Caesars at about a 28% consolidated EBITDA margin. Our pro form a gaming tax rate is in the mid-20s. 70% of Caesars gaming revenue comes from Nevada, New Jersey and Mississippi. So their pro form a gaming tax rate is in the low double digits.
And so the difference between the two is over 1,000 basis points on Caesars total gaming revenue.
Okay. Thank you. And you talked about the decentralized network. Is the Vegas Strip is the plan for Vegas Strip to also be decentralized? And can you just talk about, I guess, some of the challenges with decentralizing a market that has several properties?
Well, Vegas will be its own region. So we have 5 regions right now. We intend to split our Midwest region into a Missouri, Iowa region and an Indiana, Illinois region and add a strip region. So we run our company regionally with 5. There will not then be 7.
So the Strip will be its own operating entity.
Got it. That's helpful.
And then just one last quick one for me. Tom, you mentioned a path to $4,000,000,000 to $4,500,000,000 of EBITDAR. Can you help me understand the timeline for that? Is that a year after closing that was your expectation? Or is it a little bit longer than that?
Well, if you look at the 2 of us in 2020 when this closes and add in the $500,000,000 of announced synergies, we should be just shy of $4,000,000,000 there. So you should be thinking of 2021, we're in that range that we're talking about.
Okay, great. Thank you very much.
Next question is from David Farber from Credit Suisse. Please go ahead.
Good morning, guys. How are you?
Good. How are you?
Good. I feel a bit of the I knew you win mentality. But in any event, I wanted to touch base on a couple of things. On synergies, I think investors that have followed you guys understand and appreciate the company's ability. I guess my question is with Caesars improving margins over the years, does their focus coming into this transaction change your thinking in terms of buckets of value, timing or cost to achieve the synergies?
And then I had a follow-up. Thanks.
No. The same opportunity is available in Caesars as every other acquisition we have done today.
Okay. And then you touched on the balance sheet a bit, but perhaps you can talk about the assets on the Cesar side. Do you envision any sort of capital improvements that may need to be made? And then as a follow-up, you touched upon this very briefly, but maybe on the online platform side and the existing deals you have, does this transaction materially change those in terms of just having a much larger scale and reach? Thanks.
I'm going to have you repeat the second question. Repeat, go again.
Capital improvements on Caesars, do you envision the assets being in the shape?
The strip is from a room product standpoint is fantastic. There's some public area stuff that we would likely touch, nothing that's super urgent or super expensive. Across the regional portfolio, I would say there's some cleanup, but I think you're talking about in the total portfolio over a number of years, maybe $300,000,000 to $500,000,000 nothing that's super material to the combined company given the size.
Okay. And then my follow-up was, you touched upon it very briefly, but the online platform, I think, is relevant. And I guess I'm curious, given your larger scale pro form a for Caesars, how you think about the deals you have and perhaps the betting platform going forward?
Yes. I mean, so we've got now we have brands that are powerful in terms of moving. We've got 65,000,000 people in our database. We have really a powerful engine to drive that business. We have our partnerships on the sports betting side to the extent that online on the casino side develops in a similar fashion, we could do that, something like that again.
So we are extremely well positioned for online, both on the sports betting and casino side as we move forward.
Okay, thanks. The next question is from Robin Farley from UBS. Please go ahead.
Great. I wonder if you could just give a rough breakdown for the $500,000,000 in synergies, kind of how much revenue and versus expense? And then I don't know if there are any particularly largest buckets of expense that you would quantify to get to that 500,000,000
dollars I'd say you're about 80, 20, maybe 75, 25 cost versus revenue in that 500. You've got between decentralized management, all the stuff that's attached there, that's the bulk of the cost side. Things like Caesars spent a lot of money with 3rd party professionals, over $60,000,000 in the last 12 months. We spend 2. That's and both of those numbers are excluding outside legal and audit fees.
There's some property level opportunity in terms of typically what we find is more layering than we typically have in our portfolio, but that's going to be the bulk of the cost side. You're going to see purchasing here could be as much as $50,000,000 or more. And then we talked about it's not in the $500,000,000 but customer acquisition tends to be a big bucket that we realize after closing.
Okay, great. Thanks. And I guess on that topic, can you give a more color on what you think can be done with the database? It's something that Caesars have always talked about, something that they've they have seen as being competitive advantage. What will be different do you think in the way that you use it or what opportunity that you see that
What we have found is there's too much subsidization of revenue in the regional assets. That's been true of all of our acquisitions, frankly, us before that, virtually the entire sector. And then we typically do we typically will yield rooms differently between cash and comp than the typical operator. We find opportunity there. We spend less dollars chasing unprofitable business in softer periods.
So those are really the 3 buckets. And if you look at our past 4 years or so, we've been growing same store EBITDA at kind of 2x to 5x our peers pretty much every quarter over that time and that's what's driving that.
Okay, great. Thank you very much.
Our next question here is from David Katz from Jefferies. Please go ahead.
Hi, good morning and congratulations everybody. Tom, you've given a fair amount of information here. But what I wanted to get a picture of is what we have seen with some of the other transactions are revenues that are flat or modestly lower with EBITDA growing. Just thinking through the profile on this, based on everything you said, it sounds like this may follow that same kind of profile.
Yes, I would say, but on the the unique part of this one is on the in the Eldorado network, I think you're going to be seeing revenues move as they're plugged into Caesars Rewards. So in the Caesars network, I think you should expect what we've seen in past acquisitions, the Eldorado side should get a bump at the same time.
Got it. And within the database, just to follow-up on the prior question, are there branding opportunities outside of the normal path, like for example, a new credit card deal given the new scale that you have? And do you have opportunities to derive better data analytics out of the database given the increased scale? And how does something like that play out?
Yes, the answer is yes to both. And I would point if you look at past acquisitions, we have found assets that others were not utilizing or really placing much value on and created value from them, I point you to the Pompano Real Estate Development and the sports betting access deals. And then I'd also point to what we did with VICI in this transaction, which was I don't know that people contemplated that what was happening here what is happening here is possible. And I would you should expect us to be looking for opportunity to create value from all of the levers that we can pull in an organization of this size, which are going to be significantly greater than we've been able to pull in the past. And you've seen the value we've created in those situations.
I have. Okay. Thank you very much.
Our next question here is from John DeCree from Union Gaming. Please go ahead.
Good morning, everyone, and congratulations again. Thanks for taking my question. Just 2 for me, Tom, and apologize if you've addressed them in some of your other comments and I've missed them. But is there any meaningful capital spend or upfront costs to integrate the 2 companies outside of normal combined maintenance CapEx? And you've given a timeline for what year 1 synergies, but as you think about integrating Total Rewards across the Eldorado network, any thoughts on timing?
Can that happen in the 1st year? Or might it take a little longer to get everything under the Total Rewards program?
I think your goal is certainly the 1st year. It's a significant project. There is yes, there is cost to integrating into systems like that. But in the scheme of the larger company, it's not particularly material. We're thinking about something in the neighborhood of $100 of $100,000,000 of total integration costs.
Got it. Thank you. And then, I guess I'll ask the question on a future outlook here. With additional M and A, you've talked about divesting some assets and this one is a big one to take down. So I hate to get ahead of ourselves, but being even larger, adding the component of total rewards to Eldorado's operational and cost control abilities, maybe without thinking too far ahead, where there's places that Eldorado and Caesars honored today, can we expect the company to over the next several years to continue to get bigger through M and A?
So what I would say is we've got a big we know we've got a big job in front of us integrating the 2 companies. We would expect it to take a little bit longer than our typical acquisition just in terms of size. As you look at the map, there really are not a lot of places in the U. S. Where we're not we don't already have a significant presence.
So I would never say never, but there's not an obvious hole that we need to fill. I think if you're looking to future acquisition activity, The piece that's missing in this combined entity is international markets where we don't have a presence. But I would expect that to the extent we went that direction, that would be several years out.
Fair enough. I appreciate all the additional color and congratulations again everyone.
Thanks, John.
Our next question here is from Harry Curtis from Instinet. Please go ahead.
Hey, good morning, everyone. And I apologize for the noise in the background. Can't be helped. Just a couple of real quick ones. Your $600,000,000 estimate for maintenance CapEx, you have a sense of what percentage of annual revenues that represents?
It should be about 5% of annual revenue.
And then second question is, you talked about too much. One of the advantages that you bring to the table is identifying the over subsidization of regional assets. And when we think about how well you've done in Atlantic City, and you've surprised even the biggest skeptics, including ourselves, what have you learned in Atlantic City in these more competitive markets than the regional assets that you can apply to Vegas?
Yes. Well, Harry, when we went into Atlantic City, what the story we tried to tell you was that's the difference is it's a destination market versus a regional market, meaning your customer comes less frequently and stays longer. So the opportunity in markets like that, including Atlantic City and Reno and Las Vegas are about optimizing who's in your room when you're going to be full. You've got an asset that spoils its produce at the supermarket. It matters who you put in that room.
We think that our experience has been a lot of the properties that we've acquired don't do the best job of yielding those rooms, particularly between putting a gambler in versus selling them for cash. And that's been a key opportunity in all of our past acquisitions. In this particular one, it's going to be critical as we bring our 10,000,000 players into the Caesars database and create more competition for our room product, particularly if we sell an asset on the strip, we've got to make sure we're doing the best job of yielding who's in that room, what rate they're paying and are they a gambler or a cash paying customer. And then it's about just being optimizing your efficiency when you're less than full and not forcing a full property by chasing business. That's been a key in Atlantic City.
That's going to be not quite as critical in Vegas because you don't have the tremendous swings in weekday versus weekend we grew up in a destination market. Everything we've done in regional, we started learning by trial and error when we got into Louisiana in 2,005. The 32 years before that, we were in a destination market. So and a super competitive destination market. So we feel like we're well positioned to compete.
We would line up our performance in Atlantic City certainly over the last 9 months versus those of our peers that we'll end up competing with on the Strip. So we feel very good about our opportunity on the Strip and how we can compete.
Very good. I'll enjoy chatting with you later.
Our next question here is from Dennis Farrell from Wells Fargo. Please go ahead.
Great. Thank you very much and congratulations. I'm just wondering what you gave a $3,600,000,000 property EBITDAR number. What are you thinking about for pro form a corporate expense? I know it's kind of fluid at this point.
That's it's hard to say at this point. You're combined your $640,000,000 I would say half that is a good starting point in terms of what's in the $500,000,000 to the extent we outperform our synergy target, you could see that be less than that.
Okay, perfect.
And then some investors have been asking about the convert. Just wanted to get the status on the Caesars convert. We would expect that the convert will convert into equity at closing. Okay. And then last one for Brett.
Brett, I was wondering, obviously, since the 2 credit boxes are separate still, If you could just give us leverage at both boxes, pro form a?
Yes, no problem. Unlike the transaction 10 years ago, what we expect to do is preserve half the existing debt, but make that that was preserved even better. Right now, Caesars and Eldorado trade is 2 of the tightest gaming credits in the industry, and
we expect that on a pro
form a basis, they will as well. So if you look at the bottom box, my merged CRC, SEOC, that will be roughly 4 times on a net leverage basis, a little bit higher on the top box, but you've got over $1,000,000,000 of free cash flow flowing up. So when you put it together on a consolidated basis, you just land right where Tom guided you to in the mid-5s.
Okay.
Thanks, guys.
Yes.
Our next question here is from Joe Sloff from Susquehanna. Please go ahead.
Thank you. Good morning. Congrats. Just last question, I guess, hitting cleanup here is, Tom, I wanted to know your view, maybe certainly expanded view, given the earlier questions, just on any of the benefits that you can realize from that centralized sort of cost function that Caesars certainly spent
a lot of money and
a lot of time putting in place, whether it's the various IT systems and so forth. And basically just from your opinion or from your vantage point, maybe the things that didn't work with that strategy and hopefully things that you want to take advantage of. Can you expand on that?
Can you repeat that? I don't know if you're on speaker, can you go on your handset? I could hardly hear that question.
Yes, sorry. Basically, I was trying to ask you about Caesars and how much time and effort they have spent and investments to centralize cost functions over the last couple of years. It seems you're going to unravel that. And are there any benefits, that you think you're going to take advantage of, as a result of their efforts and that strategy over the past couple of
years? Certainly. The and I should have made that point. They have made there are areas where centralization makes perfect sense. Finance, IT, they have spent a lot of money on IT to put in to invest into systems that we have not that we will now benefit from and those are areas where we would expect leadership from their side.
It's really the customer facing stuff, primarily marketing. And in some in a lot of cases, the legal area that become just drains on EBITDA and kind of constraints on the local operators. And that's what we unwind. So I don't want to suggest that there's nothing that makes sense in terms of central management. We just think that when the further you get from the fundamental interaction between your employees and your customers where you make your money, the more people you put in the middle of that, the worse you do.
And that's really what we unravel.
Thank you.
Our next question here is from Brian McGill from Telsey Advisory Group. Please go ahead.
Good morning, guys. Congratulations. Just want to follow-up on sports. You said you have an opportunity there. I'm wondering if you could do it yourself potentially given the size now and would you look for an acquisition potentially in the space?
I mean, I would say we will consider all alternatives in that area, but we really like the setup that we have with our partnerships. As an example, the William Hill has been fantastic with us on a first game basis. We're going to participate in the Fox Sports betting app with our Stars Group deal. We really like what we've got there. We'll analyze is there a better way to go about it, but it would surprise me if there's a different answer.
That will benefit from the extra markets, I would assume, depends on how the states play out. Yes. Okay.
That's right.
Then just a couple of quick follow ups. So on the Q1 call, you were really bullish on the outlook for regional gaming trends. Is that still the outlook as the quarter has gone on?
I mean, I would say, generally speaking, yes, you've had in terms of we had the headwinds going in that we knew with Reno lacking the big group business and Colorado on construction disruption, you've added to that with all the water in the Midwest, which has been quite extraordinary, and we haven't held in Atlantic City. But other than that, the customer continues to remain strong and we'd expect to remain strong. And frankly, we've got a lot of stuff that rolls off right now in terms of we're anniversarying the Atlantic City competitive openings. We're finishing up the quarter where we're comping, no bowlers versus bowlers in Reno. We finish up our Colorado construction this week, so we get the entire casino back.
Monarch is delayed its opening in Colorado. So we feel really, really good right now.
And then last one. With the Illinois legislation, are you going to potentially add slots at Elgin?
We're examining what to do there, Brian. It's still in flux in terms of what happens when and how quick what happens how quickly away from us and what is possible in terms of what's allowed in terms of moving equipment onto land. But we have, as you know, a well developed land based pavilion there that could be utilized for equipment that we're analyzing at the very least taking the equipment the positions out of the bottom of the lower level of the boat and bringing them land based, but that's in real time and in discussion with our local guys and with what we can do with the state.
Okay. Thank you very much.
Thank you. We got time for one more.
Great. And our last question here is from Ricardo Chinchilla from Deutsche Bank. Please go ahead.
Hey, guys. Just a quick one for me. With regards to the debt that you already had in place with BT regarding the other property, is that going to stay in place? Or you guys are contemplating closing a transaction on that as well?
You're talking about the leases with VICI?
No. I mean the loan that you guys have, the mortgage loan.
The mortgage loan? We just did. Oh, you're talking about the GLPI Lumiere loan?
Yes, sorry.
So that's a vestige of the Tropicana acquisition. So that's a temporary piece of our balance sheet. We're going to swap assets out of our owned assets at Eldorado to replace the economics of that, the Lumeir piece that GLPI couldn't close on in Missouri. So really Yes.
Great. And what was the driving force between you guys redoing your whole structure about calling the other bonds? Because based on our analysis, you basically could keep some of the bonds in place given that there was no change of control?
We are keeping the Caesars side in place because there is no change of control. The side we're taking out is the Eldorado side. Yes. The Eldorado side, there's covenants in those notes that would make it impossible to work around.
Okay, got you.
All right. Thanks, everybody. We look forward to talking to you soon. And yes, we'll be talking about the quarter in about a month. Thanks, everybody.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.