BREAKING: Cosmopolitan Sold!

Cosmopolitan of Las Vegas
Cosmopolitan of Las Vegas

Cosmopolitan of Las Vegas was sold by Deutsche Bank to Blackstone Real Estate Partners for $1.73 Billion. Since this is still developing I’ll pass on information as it’s decimated disseminated.

I’ll keep updating this list as news comes in. I’m off to get coffee.

Is Caesars Freeing Up Cash For Cosmopolitan?

Earlier this week I wondered aloud if Cosmopolitan was sold or on the market. After re-reading both articles I sourced and seeing responses here and on twitter I think it’s safe to say that Cosmo wasn’t sold to a drug company. It’s time to hypothesize what will happen to Cosmo.

That said, it seem look as if the owner of Cosmopolitan of Las Vegas, Deutsche Bank, will be putting the casino on the market next year.

However, the bank is unlikely to pursue a sale of those companies before 2013 because of difficult conditions for mergers and acquisitions.

Earlier this week I was having a twitter conversation with Vegas Tripping contributor Misnoper. While @Misnoper is trying to figure out why Penn National purchased Caesars in St. Louis for $610 million in cash, I’m wondering if Caesars Entertainment isn’t preparing to buy Cosmopolitan.

Caesars Entertainment Corporation (NYSE: CZR) has signed a definitive agreement to sell Harrah’s St. Louis to Penn National Gaming, Inc. for $610 million in cash. The transaction is expected to close in the second half of 2012, subject to regulatory approvals

The $610 million price almost looks like a fire sale by Caesars just to grab some cash.

The deal looks good for Penn, but it’s questionable for Caesars Entertainment. The company had $2.0 billion in EBITDA in the last 12 months and has $18.8 billion in net debt. That means the company’s debt is worth 9.4 times EBITDA. With this sale, even if it pays down debt with the proceeds, Caesars will increase its leverage and reduce its enterprise value/EBITDA ratio.

Caesars is known for using cash to pay down debt. They just seem to always renegotiate to push the debt off into the future. The company line says that the money will be used to grow Caesars Entertainment.

“The sale of this property exemplifies our strategy to maximize returns from our mix of assets through investments in new markets as well as occasional divestitures,” he said. “We are committed to expanding our distribution network into growth markets that have the potential for high returns.”

I never believe the company line and I call BS. It doesn’t mean I’m right, I just don’t believe that selling an asset for cash below market value was necessary to make a small acquisition.

I’m sure that all of these companies have ties, but it’s interesting that:

Deutsche Bank Securities Inc. served as financial advisor to Caesars Entertainment on this transaction.

Beyond the sale of Caesars St. Louis is the fact that rumors about Playboy Club opening at Cosmo later this year persist. While nothing is confirmed, I always believe that where there’s smoke there’s fire. Maybe this is coincidence, maybe it’s not.

London Club International, part of Caesars Entertainment Corp., launches the Playboy Club in London. The new gaming and entertainment venue will feature a restaurant, lounge, members club, table games and high-limit salon prive gaming rooms.

Las Vegas seems to be the market that is earning Caesars the most revenue, so why not continue to load up on the city.

In a conference call with analysts following the earnings release, Caesars Chairman and CEO Gary Loveman said there were positive results across its portfolio of Strip-area resorts, which include Caesars Palace, Planet Hollywood, Harrah’s Las Vegas and the off-Strip Rio.

Net revenue for the company was up 0.4 percent, to $2.23 billion. Revenues from the Strip grew 10.3 percent, to $786.4 million.

Put all of this together and there is a distinct possibility that the Caesars empire grows in Las Vegas. It’s hard to ignore the following:

  1. $610 million cash on hand by the end of the year.
  2. Cosmo going on sale in 2013.
  3. Deutsche Bank helping Caesars gain the cash.
  4. Playboy partnership + Cosmo link.
  5. Las Vegas carrying Caesars.

This is just me putting 1+1+1+1+1 together to put Caesars in the mix. There are a lot of reasons that MGM Resorts International buying the property makes sense, but they’ve been very quiet if they’re making moves.

All signs point to Cosmo becoming a Total Rewards casino. I welcome that.

Is Cosmopolitan of Las Vegas Up For Sale or Sold?

I was looking to see if Cosmopolitan of Las Vegas (full name for Google) reported earnings last week. I knew they were going to be delayed, but I haven’t heard anything and was curious. I didn’t find earnings because they haven’t been reported. That can’t be good.

In that search I found an article about Deutsche Bank that made me think. Deutsche Bank own, or owned, Cosmo. I don’t quite understand corporate financial transactions, but from what I gather in this Bloomberg article is that Cosmopolitan was up for sale along with a group of other *temporary* assets.

Deutsche Bank AG (DBK) will probably book an additional charge of as much as 400 million euros ($528 million) tied to the sale of Actavis Group hf to Watson Pharmaceuticals Inc. (WPI), people familiar with the process said….

…Actavis is part of 12.2 billion euros of non-strategic assets Deutsche Bank holds at its corporate investments unit, according to the company’s report for 2011, published in March.

The unit also includes the Cosmopolitan Resort & Casino in Las Vegas, which the bank foreclosed on in 2008 when developer Ian Bruce Eichner defaulted on a loan, and a stake in Canadian port operator Maher Terminals, which it agreed to acquire in 2007. The units are all held for “investment purposes on a temporary basis,” according to the report for 2011.

I’m more of a marketing person, than an economics person so forgive me if I misinterpret the article. That said, if I read this correctly Cosmo was sold to Watson Pharmaceuticals Inc. as part of a larger sales of assets by Deutsche Bank. If the Cosmo was actually sold to a drug company look for it to be flipped again pretty quickly.

I’m not much for mainstream media and it’s no surprise to me that this story is conflicted with a Financial Times article which says that Cosmo is NOT going to be a part of this deal.

Deutsche Bank also owns Cosmopolitan, a Las Vegas resort and casino scheme that went into foreclosure in 2008, and Maher Terminals, the terminal operator it acquired in 2007.

However, the bank is unlikely to pursue a sale of those companies before 2013 because of difficult conditions for mergers and acquisitions.

The fact that the fortunes of Cosmopolitan and Maher Terminals are strongly tied to the state of global trade and the health of the economy will stall any sales, people familiar with the situation said.

Cosmo being sold to this drug company or is being held for another buyer for another buyer is almost irrelevant since the casino isn’t destined to be run by a drug company.

If FT is correct, we shouldn’t expect a sale until next year. If Bloomberg is right, Cosmo was sold and is likely to be sold again. Tomorrow I’ll hypothesize with a new owner.