Carl Icahn has sold Tropicana, Fontainebleau, and Trump Taj Mahal within the past calendar year.
Carl Icahn sold Tropicana Entertainment for $1.85 billion to Eldorado Resorts and Gaming and Leisure Properties (GLPI). It is the second big deal in a week, as Carl Icah sold his auto-parts company, Federal-Mogul, to Tenneco in a $2.4 billion deal.
Icahn, a New York activist investor who was termed a corporate raider in the 1980s, had been building his casino portfolio since 2008, when he first bought Tropicana shares. In 2010, he bought a controlling interesting in Tropicana Casino in Atlantic City. Until this week, he held 83% of the property.
On news of the sale, Tropicana Entertainment stock rose $15 to $70-a-share. Only two years ago, shares traded for $16-a-share, causing Barron’s to call it “one of the most undervalued” stocks.
Tropicana Casino Turnaround
When he acquired Tropicana casino, it was bankrupt and the United States was in the middle of the biggest economic downturn since the Great Depression. Employees told of a new energy and vision for the casino, even during the worst days of the Global Recession.
Over a 5-year period, Carl Icahn took Tropicana from a bankrupt casino in a failing casino town to a profitable enterprise. In between, 4 Atlantic City casinos failed: Atlantic Club, The Showboat, Trump Plaza, and Revel Casino. A fifth Boardwalk casino, Trump Taj Mahal, only remained in operation because of Carl Icahn’s bailout and buyout.
In many ways, Tropicana Casino was Carl Icahn’s biggest success in the casino industry. He affected a turnaround at an Atlantic City casino that many considered to be a failure. Unfortunately, he could not do the same for the ill-fated Trump Taj Mahal.
Trump Taj Mahal Labor Problems
When he attained control of Trump Entertainment Resorts, the company had won a key court decision against the casino’s workers union only months before. In order to keep the Atlantic City casino solvent, a New Jersey judge agreed to let the gaming company tear up the workers’ pension and health benefits package.
Carl Icahn did not call for those concessions in the courtroom, but armed with the law, he enforced its provisions ruthlessly. Trump Taj Mahal workers protested Icahn for many months, then eventually went on strike over the Fourth of July Weekend of 2016. Though Icahn gave similar concessions to workers at Tropicana Casino, he refused to budge on pension and health benefits for 1000 of the Trump Taj Mahal’s workers. (He offered a benefits package, but the workers argued it was not worth having.)
Three weeks into the strike, Carl Icahn announced he would close the Trump Taj Mahal — effective in October 2016. Many New Jersey politicians thought he would close the casino and re-open without union workers, so they sought laws to punish Icahn if he did so. While the move failed, a disgusted Carl Icahn decided to sell the casino and be done with it.
Trump Taj Mahal Sale
Icahn sold Trump Taj Mahal to Hard Rock International last year, but he retained control of Tropicana Casino, the healthier of the two properties. Now he has sold his casino shares, which includes a property in Las Vegas.
After cashing out on his Atlantic City casino enterprise, Carl Icahn said, “Icahn Enterprises first acquired an interest in Tropicana in 2008. Tropicana was bankrupt and desperately needed new leadership.”
“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.”
Fontainebleau Resort Sale
Earlier this year, Carl Icahn sold his stake in the Fontainebleau casino development in Las Vegas yto the Witkoff Group of New York City. Like the Tropicana, he bought a bankrupt casino property at the low ebb of its fortunes, knowing it would be a good investment for better economic times. He bought Fontainebleau for $150 million and sold it for $600 million.
The financial particulars in the Tropicana Entertainment deal have not been revealed, because Icahn owes taxes on the properties. One source suggested the deal included a $100 million tax bill.
