Oct. 17–Houston billionaire Tilman Fertitta — owner of a restaurant and hospitality empire, the Houston Rockets and a gleaming new high-rise hotel next to his West Loop headquarters — has approached the Las Vegas gaming company Caesars Entertainment Corp. about a possible merger with his Golden Nugget casino chain and restaurant group, according to sources familiar with the plan.
The sources said the proposed deal would make Galveston-born Fertitta chairman and CEO of Caesars, which operates 55 casino and hotel properties, including brands such as Caesars Palace, Harrah's, Flamingo and Planet Hollywood Resort & Casino. Caesars has most of its real estate in the United States, but the company also has properties in Africa, Europe and South America.
Under the proposal, Caesars would combine with Fertitta's privately held Golden Nugget LLC, including its vast stable of restaurants, such as Landry's. Golden Nugget is valued around $3 billion, according to sources.
Fertitta's businesses last year had sales of $3.5 billion and debt around $4.3 billion, according to Bloomberg data.
Feritta's proposition comes one year after Caesars emerged from Chapter 11 bankruptcy protection as the largest gaming operator in the United States. The deal would allow Fertitta to lead a prominent gaming company while putting Landry's and his other restaurants throughout Caesars properties. Fertitta and Caesars declined to comment.
If the deal goes through, it would be the latest in a series of mergers and acquisitions in the U.S. gaming sector as companies look to consolidate operations amid increased competition from new casinos and online gambling.
Earlier this week, Penn National Gaming of Pennsylvania closed on its $2.8 billion acquisition of Pinnacle Entertainment of Las Vegas, creating the nation's second-largest gaming company based on number of properties, 40.
"Companies are trying to become more profitable by acquiring more properties and cutting costs," said David Schwartz, director of the University of Nevada, Las Vegas Center for Gaming Research.
Merging Caesars and Golden Nugget would give the combined company a complementary mix of large and midsize casinos across the U.S. and dozens of new locations for Landry's, the researcher said.
"It's a big expansion for Landry's," Schwartz said. "Caesars has a significant amount of real estate."
The possible deal was first reported by Reuters.
Fertitta, whose net worth Forbes estimates at $4.5 billion, built his fortune in the restaurant business, operating such brands as Landry's Seafood, McCormick & Schmick's, Morton's The Steakhouse, Mastro's and Rainforest Cafe. He got his start in the early 1980s, took his company public in 1993 and and expanded through acquisitions.
He purchased Golden Nugget Hotel and Casino in downtown Las Vegas in 2005 and later acquired and built additional casinos from Atlantic City, N.J., to Lake Charles, La. In 2010, he took the company private again.
Last year, he purchased the Houston Rockets for an NBA record $2.2 billion and recently completed a $350 million hotel and upscale conference center called The Post Oak Hotel next to his headquarters along the West Loop near Post Oak Boulevard. The company is in payment disputes with general contractors that worked on Golden Nugget Lake Charles and The Post Oak. He also stars in CNBC's reality show "Billion Dollar Buyer."
In addition to its hotels and casinos, Caesars operates more than 300 restaurants, 1.5 million square feet of meeting space and more than 200 nightclubs. Celine Dion, Gwen Stefani and the Backstreet Boys are some of the resident headliners in Las Vegas.
Caesars has locations in 13 states: Arizona, California, Nevada, New Jersey, Illinois, Indiana, Iowa, Louisiana, Maryland, Mississippi, Missouri, North Carolina and Pennsylvania. Golden Nugget operates in three: Nevada, Louisiana and New Jersey.
In some markets, the combined company may have to sell or shutter some locations because of overlap, Schwartz said. For example, Atlantic City, N.J., has a Golden Nugget and three Caesars properties.
"That could be a concern," Schwartz said. "They would have to do some selling, I would think."
While real estate is a big draw for Landry's, so too is Caesars' loyalty program, which the company has run for two decades. Caesars operates Total Rewards, a players club card that gives loyal customers points and rewards for gambling, dining and spending their money on their properties in exchange for free hotel nights, entertainment tickets and meals.
Caesars' Total Rewards has a 55-million-member database valued at $1 billion, according to the company's bankruptcy filing. It represents a significant marketing tool for Landry's, which also operates several loyalty programs, including Landry's Select Club for its restaurants and 24K Select Club for its Golden Nugget casinos.
nancy.sarnoff@chron.com
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