In a Securities and Exchange filing Monday, Dover Downs Gaming & Entertainment said it had entered into a definitive merger agreement Sunday with Twin River Worldwide Holdings.
As part of the agreement, privately held Twin River will become a publicly traded company. The agreement calls for Dover Downs stock to be exchanged for Twin River common shares representing 7.2 percent of the equity in the combined company at closing.
Closing of the deal is subject to approval by regulatory authorities and Dover Downs shareholders.
“The community is going to see a stronger, more stable Dover Downs over the long run,” said Dover Downs CEO Denis McGlynn. “I think it’s going to put us in a better position to be able to step up to the level of competition we need to offer, given the surrounding states.”
Twin River’s current holdings include two casinos in Rhode Island, the Hard Rock Hotel & Casino in Biloxi, Mississippi, and a horse racetrack with off-track betting in Aurora, Colorado.
Twin River Executive Chairman John Taylor Jr. said his company has been seeking to create greater shareholder value, expand its geographic footprint and strengthen its financial position.
“This merger should well position us to achieve all three objectives in a context in which existing shareholders of Twin River who desire it could obtain liquidity,” Taylor said in a prepared statement.
The acquisition of Dover Downs was announced just three weeks after Delaware lawmakers approved a tax cut for Delaware’s three casinos, which are struggling amid increased competition from neighboring states.
The bill cuts the state’s share of gross slot machine revenue from 43.5 percent to 42.5 percent, with additional reductions of 2 percent allowed if a casino’s capital expenditures equal or exceed 3 percent of its net slots proceeds. The bill also cuts the state’s share of table game revenues from 29.4 percent to 15.5 percent and allows casinos to avoid the annual licensing fee by investing in their businesses.
McGlynn said talks with Twin River began about a year ago, and that the deal was not contingent on passage of the tax-relief legislation.
“It just happened to be helpful. I think it made us a little more attractive,” he said.
The deal is not expected to close until late this year or early next year, pending Twin River’s SEC registration as a publicly traded company, approval by Dover Downs shareholders, and the blessing of officials in both states.
“The state will review the transaction to ensure it is consistent with Delaware law,” Delaware officials said in a prepared statement, adding that they look forward to learning more about the details.
McGlynn said he expects any potential impact on jobs at Dover Downs, which has about 900 full-time workers, 600 part-time workers and 300 subcontractors, would be minimal.
“We were a pretty lean operation by default here,” he said. “There’s really no fat here to get cut.”
Dover Downs shares closed Monday up 52 percent, or $1.05, at $3.07 after hitting a 52-week high of $3.49.