Caesars Disputes Transfer Fee for $1.7-Billion Indiana Casino Acquisition Deal

Caesars Disputes Transfer Fee for $1.7-Billion Indiana Casino Acquisition Deal

Las Vegas casino giant Caesars Entertainment Corp. has threatened to abandon a $90-million casino project in Indiana, if the state’s gaming regulator decides that a $50-million transfer fee applies to the operator’s acquisition of Centaur Gaming LLC.

Late last year, the major gambling company announced that it has agreed to buy Centaur Gaming and its two Indiana-based gaming venues – Hoosier Park Racing and Casino (Hoosier Park) in Anderson and Grand Racing and Casino (Indiana Grand) in Shelbyville – for $1.7 billion in cash. Caesars currently owns two properties in Indiana – Horseshoe Southern Indiana in Harrison County and Horseshoe Hammond Casino in the northwest part of the state.

The acquisition deal first needs to be reviewed and approved by the Indiana Gaming Commission and the Indiana Horse Racing Commission before being completed. The transaction is expected to be considered by the two regulatory bodies in May or June.

The Indiana Business Journal reported on Monday that Caesars, Centaur, and the Indiana Gaming Commission have apparently engaged in a debate over whether a $50-million transfer fee should be paid by the owner of the two gambling venues that are to be acquired.

Under Indiana gaming law, an initial casino license holder is obligated to pay a $50-million fee for the transfer of the license when a controlling stake in the licensed properties is sold to another business. However, there are several exceptions to that law. For instance, the fee requirement is not applicable when a transfer is initiated after the initial license holder had filed for bankruptcy.

Previous changes in the ownership of Hoosier Park and Indiana Grand had occurred without initial license holder being required to pay the $50-million transfer fee. However, those transactions had taken place following bankruptcy filings on those occasions.

Local media reported that both Caesars and Centaur have contested the $50-million transfer fee, arguing that it should not apply as the transaction does not involve initial license holders. However, it is understood that staff at the Indiana Gaming Commission disagree with the claim after researching the matter.

Jennifer Reske, Deputy Director at the gaming regulator, told local media that gaming commissioners are yet to review the matter in May or June and that a final decision will be made after their review. Ms. Reske went on to say that after conducting a review of the fee’s applicability in this case, the staff has decided that the transfer fee applies to the acquisition of the two gaming venues by Caesars, but that decision could differ from the one made by the Commission.

The Future of the $90-Million Casino Project

It has also emerged that Caesars might decide to abandon previous plans to move its Horseshoe Southern Indiana riverboat casino onto land. The casino operator reportedly planned to introduce its renovation and relocation project last week, but decided against that due to the uncertainty over the applicability of the transfer fee.

Under a 2015 state law, owners of riverboat casinos could relocate those onto dry land under certain conditions. Details about the Horseshoe Southern Indiana project had been supposed to be presented before the Gaming Commission on March 8 as Caesars had believed that a solution to the transfer fee issue would have been foundby then.

Caesars had said in email exchange with Indiana commissioners obtained by the Indiana Business Journal that it would have preferred not to pull it from the Commission’s March 8 agenda, but the uncertainty over the transfer fee had forced it to.

Centaur has also joined the debate, arguing that the transfer fee does not apply in this case. The company has informed the Commission that it was considering appropriate actions and that these actions might involve litigation.