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LOUISVILLE, Ky. — The merger of two big Nevada gambling companies has opened a huge opportunity for Churchill Downs to seize control of its biggest competitor in Louisville — Caesars Southern Indiana casino — amid a shuffle of Indiana gambling properties.
Churchill chief executive officer Bill Carstanjen declined to say Thursday whether his company might bid on the gambling complex — located 12 miles down the Ohio River — when an analyst asked about Churchill's potential interest during the company's second-quarter earnings conference call.
But gaming analysts see such a purchase as a smart play for Churchill to cover its flank and also reap the benefits of more legalized gambling options across the river, starting with the sports betting now establishing a foothold in the state.
Ed Feigenbaum, an authority on Indiana gambling, described a Churchill takeover as 'a no-brainer' and predicted a deal could easily clear state regulatory hurdles.
'Churchill can protect its backyard, add to its Indiana customer base, and obtain a missing link between its Chicagoland properties and Louisville,' Feigenbaum wrote in Indiana Gaming Insight, a newsletter that tracks the state's gambling industry.
'The company has the resources (particularly given that it could back off some of its defensive Louisville investments), and should have no trouble being licensed (it already received approval for its sports wagering partnership with Rising Star),' he wrote in this week's issue, referring to the casino upriver in Rising Sun, Indiana.
In early July, the Indiana Gaming Commission approved the $17.3 billion merger of Reno, Nevada-based Eldorado Resorts and Caesars Entertainment Corp. — but only after Eldorado executives agreed to divest three Indiana properties to alleviate concerns posed by the company's market concentration.
Eldorado CEO Tom Reeg indicated that Caesar Southern Indiana probably would be put on the sale block, with agreements to divest in hand by Dec. 31.
The deal between Caesars and Eldorado combines Horseshoe Hammond Casino in Hammond, Caesars Southern Indiana, Harrah’s Hoosier Park Racing & Casino in Anderson, Indiana Grand Racing & Casino in Shelbyville and Eldorado's existing property, Tropicana Evansville.
Since the newly named Caesars Entertainment Inc. would control 50% to 60% of gaming revenues in Indiana, it needed to shed at least two of those properties to drop to about 40% or lower, according to the Indianapolis Star's coverage of the merger.
Carstanjen, responding to questions about the company's merger and acquisition ambitions Thursday, said that of the nation's 520 casinos, he and other executives 'could talk fairly fluently about any of those.' It also stashes cash to move on 'targets on our list,' he said.
That gave way to the question about Caesars. Any interest? Carstanjen insisted he shouldn't comment on any 'asset that's in the marketplace.'
But what an asset. For years after the Hoosier complex opened in late 1998, the historical race track saw millions of Louisville's gambling dollars siphoned by its newer, glitzier competitor. Churchill brass years ago acknowledged the casino entry forced them to battle back, investing hundreds of millions of dollars to refurbish its aging racetrack.
© Marty Pearl/Special to Courier Journal Caesars Southern Indiana officially opened its new $90 million dollar land-based casino on Thursday after 21 years of being a riverboat operation. The 110,000 square foot facility merges all of the gaming, alongside dining and retail, onto one floor. 12/12/19More: Churchill Downs pauses sale of Kentucky Derby infield tickets due to COVID-19 pandemic
The market battle hasn't been lost on industry analysts. They saw the year-round slots action and table games at Caesars as a direct shot over the bow at Churchill. The Kentucky gambling company, meanwhile, dramatically expanded since the late 1990s, buying race tracks and casinos and investing big on online gaming, sports books and mobile betting platforms.
But it never sat well that Churchill was getting whacked in its own backyard. The bosses on both sides of the river got a surprise two years ago with the success of Churchill's $65 million historical racing venue, Derby City Gaming.
It pulled back Kentucky customers and cut the casino's slots profits significantly. Caesars countered last December with a new $90 million land-based casino and predicted its improvements would lure back patrons who'd begun frequenting Churchill's Poplar Level Road property.
As for who's in the hunt for the Indiana casino, Feigenbaum noted that other, deep pocketed players may try to swoop in. But a Churchill deal would bring full circle what the Louisville-based gaming giant attempted in the early 1990s.
Teaming with Clark County leaders in hopes of floating a gambling vessel across from downtown Louisville, the plans were torpedoed quickly. Voters in both Clark and Floyd counties rejected referenda to allow gambling, and regulators ultimately awarded the coveted permit to Harrison County.
Besides a large dining and entertainment complex, Caesars has a 500-room hotel. Despite a hit from the pandemic recently, the casino has been a golden goose, paying $20 million and more to a once cash-starved county.
Caesars Riverboat Casino Louisville Ky Caesars Indiana
Grace Schneider: 502-582-4082; gschneider@courierjournal.com; Twitter: @gesinfk. Support strong local journalism by subscribing today: courier-journal.com/graces
Caesars Riverboat Casino Indiana
This article originally appeared on Louisville Courier Journal: Could Churchill Downs buy Caesars Indiana casino? An expert says it's 'a no-brainer'