The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Jonathan Guilford

NEW YORK, May 28 (Reuters Breakingviews) - Caesars Entertainment CZR.O dispels the idea that the house always wins. The Las Vegas casino operator has been on a rough streak that includes a ruthless 2015 bankruptcy battle. Entertainment mogul Tilman Fertitta is now buying it for $18 billion, around the same price at which it was valued in another deal seven years ago. A jackpot, however, may finally pay out.

Pandemic lockdowns brutalized Sin City, home to the storied Caesars Palace. The parent company’s stock price nearly halved from the time it completed the merger with peer Eldorado Resorts until a February Financial Times report about renewed interest from Fertitta, who now serves as U.S. ambassador to Italy. His business empire spans steakhouse chains, gambling dens and the National Basketball Association's Houston Rockets.

Although Fertitta lost out in the 2019 Caesar M&A showdown, he's buying in cheaper this time. Eldorado paid about 7 times EBITDA; today's purchase price is closer to 5 times, based on its expected results this year, according to estimates gathered by Visible Alpha.

The casinos are squeaking by. Caesars spun off much of its real estate into VICI Properties VICI.N back in 2017; between the trust and another landlord, it estimates about $1 billion in remaining lease payments for the year after the first quarter. What it still owns is implicitly less valuable in a world of rising interest rates and sliding yields. Las Vegas revenue is flat while profitability in its regional division tracks for slight erosion.

A digital business long considered too small to compete against online whales is now generating EBITDA and growing. Prediction markets pose a new threat, however, and might thwart any ideas of a breakup until legal clashes are resolved. For now, valuations for Flutter and other owners of sports-betting apps have tanked.

Fertitta will be holding a few good cards. For one thing, an enlarged tenant and customer can negotiate tougher. Caesars also owns the industry’s largest loyalty program, which counted over 60 million members by 2023. Bolting Fertitta's casino franchise and 600 properties onto those rewards makes the whole package more attractive. Airlines long ago realized how lucrative rewards help retain customers and open other opportunities like co-branded credit cards. Doubling down on repeat business sounds like a decent bet.

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CONTEXT NEWS

Caesars Entertainment said on May 28 that it had agreed to be acquired by Fertitta Entertainment in an all-cash deal that values it at $17.6 billion, including about $11.9 billion of the casino operator's outstanding debt.

PJT Partners is advising Caesars while Morgan Stanley and Goldman Sachs are advising Fertitta.