NEW YORK CITY—Icahn Enterprises completed two whopping transactions on the same day. The New York City-headquartered conglomerate closed on the sale of Federal-Mogul to Tenneco, comprising $800 million in cash and 29.5 million shares of Tenneco common stock. That deal was valued at $5.4 billion when Icahn first announced it in April. It also closed on the sale of Tropicana Entertainment to Gaming and Leisure Properties and Eldorado Resorts for approximately $1.85 billion.

“Icahn Enterprises first acquired an interest in Tropicana in 2008. Tropicana was bankrupt and desperately needed new leadership,” says Carl E. Icahn, chairman of Icahn Enterprises. “At that time, we identified this undervalued asset as being a perfect situation to deploy our modus operandi, by which we seek to acquire undervalued assets, nurture, guide and improve their condition and operations, and to ultimately greatly enhance value for all shareholders.”

The Wyomissing, PA-based REIT specializing in casinos, Gaming and Leisure Properties, announced it purchased the real estate assets of five casinos from Tropicana Entertainment for $964 million. This included Tropicana Atlantic City, Tropicana Evansville, Tropicana Laughlin, Trop Casino Greenville and The Belle of Baton Rouge.

Eldorado Resorts will acquire the operating assets of the casinos, leasing the real estate from Gaming and Leisure with a 15-year initial term and four 5-year renewal periods. Initial annual rent is $87.6 million and the initial rent coverage is approximately double the projected value based on 12 months ended June 30, 2018 Tropicana Adjusted EBITDA. Gaming and Leisure also provided a $246 million mortgage loan to Eldorado to finance its acquisition of the Lumiere Place from Tropicana, with initial annual interest payments of $22.4 million.

The combined properties include 350,000 casino square feet, 7,416 slot machines, 237 table games and 4,993 hotel rooms.

Gaming and Leisure funded the transaction with a senior unsecured notes offering, which closed on Sept. 26, 2018, with an aggregate principal amount of $1.1 billion, plus proceeds from the company's revolving credit facility.

“We are pleased to consummate this accretive transaction, which materially increases our real estate income and further diversifies our geographic base. The addition of Eldorado as a new tenant diversifies our cash flow and offers a new partner for potential future transactions,” says Peter M. Carlino, Gaming and Leisure's CEO. The company projects an initial annual income from the transaction of $110 million.

Regarding the sale of the auto-parts company, Icahn says, “Icahn Enterprises acquired a majority control of Federal-Mogul in 2008 when we saw an out-of-favor market opportunity for a great company. During that time, we have built one of the leading global suppliers of automotive products.”

In addition to the cash and stock, Tenneco would assume Federal-Mogul debt, according to the initial deal announcement. This raised the deal's value to $5.4 billion, according to a Barron's article published on April 10, 2018. The publication noted that the sale would lift Icahn Enterprise's net asset value, and most of the gain from the deal would be sheltered from taxes because the payment was mostly in stock.

Instant Insights /

Icahn Closes on Sales of Tropicana and Federal-Mogul

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