High Interest Rates Stall Casino Merger and Acquisition Activity

High Interest Rates Impact Casino Mergers and Acquisitions

The casino industry is currently experiencing a slowdown in mergers and acquisitions, largely due to elevated borrowing costs. At the recent Global Gaming Expo (G2E) held in Las Vegas, industry insiders noted a subdued atmosphere with less enthusiasm for major deal-making compared to previous years.

Cautious Sentiment at G2E Amid High Borrowing Costs

According to research by analyst Jeffrey Stantial from Stifel, executives and investors attending G2E expressed caution rather than eagerness. Financial challenges faced by high-end properties on the Las Vegas Strip have left prospective buyers hesitant. With borrowing expenses remaining high, many are reluctant to commit to significant acquisitions until interest rates decrease.

This hesitation has particularly affected Caesars Entertainment, a company many have speculated might sell some of its Las Vegas Strip casinos to reduce debt. However, Stantial’s analysis indicates such sales are unlikely in the near term due to a shortage of buyers with sufficient capital and the current high cost of borrowing. Most companies prefer to wait for more favorable interest rates, which are anticipated to ease within the next one to two years.

Similarly, the regional casino market is feeling the effects of this cautious environment. Few premier properties are available, with many of the assets on offer being lower-tier and therefore less appealing to major players aiming to expand. As a result, buyers are generally postponing transactions, hoping for better opportunities down the line.

Century Casinos Evaluates Its Portfolio, Eyes Canadian Properties

Amidst this landscape, Century Casinos is distinguishing itself by carefully reviewing its holdings. They may decide to sell some properties, with industry experts suggesting their Canadian locations, which tend to have higher valuations compared to US assets, could be among the first considered for sale. Nonetheless, a widespread divestment is not expected in the short term.

Beyond traditional casinos, there is growing interest in digital sectors such as prediction markets and online sports betting. Recent increases in funding for prediction markets have attracted online betting companies looking to acquire strategic assets. However, regulators remain vigilant, with several US states warning that engaging in event-based contracts could pose risks to existing gaming licenses.

Currently, the casino industry appears to be adopting a cautious stance, holding off on large mergers until borrowing costs become more manageable. Smaller, incremental deals may continue to occur, but significant transactions are likely to remain limited for the foreseeable future.