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Cosmopolitan Sold For $1.78B to Blackstone

By Chuckmonster on Thursday, 15th May 2014 9:41am
  » filed under Las Vegas  comments: 21

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Apparently, the right amount of wrong does have a price tag. Deutsche Bank has sold The Cosmopolitan of Las Vegas to Blackstone private equity group for $1.73B in cash.

Blackstone Group is one of the largest private equity firms. In addition to holding a chunk of Caesars Entertainment (along with Apollo Global Management and Texas Pacific Group) Blackstone has worked in the casino sector as a turnaround advisor for Station Casinos, Kerzner International, The Mashantucket Pequot Tribe (Foxwoods) and Mohegan Tribal Gaming Authority (Mohegan Sun). They've also helped pull Ford Motor Company out a financial ditch, scrubbed Dow Corning Corp.'s books, refilled Xerox Corp. toner and held Enron's hand as it went through bankruptcy.

Experts pegged the value of Cosmopolitan at $700m-$1b at best, with DB's $2b asking price considered to be outrageous. Did Blackstone overpay?

It is hard to tell if this is a standard turnaround play or if Blackstone is going to give a go at creating a gaming platform, in which case they'll have to buy some other stuff to make it happen. Another outside possibility (debunked, see below*) is that Blackstone is angling for Cosmopolitan to be absorbed into their Caesars holdings via 'strategic partnership.' Good luck getting past regulators. Another possibility is Blackstone did the dirty work on behalf of a shadow entity (Tribal gaming?) to be named later.

Wall Street Journal reports that other bidders were Crown Resorts LTD (headed by James Packer) and a venture formed by the holy trinity of TPG Capital, Apollo Global Management and Caesars Entertainment.

The sale of Cosmopolitan to Blackstone still doesn't remedy their biggest problem - lack of player development marketing ecosystem. They're treading water in a sea of optimization and cost cutting until someone throws them a rolodex.... unless Blackstone rolls Cosmopolitan into Hilton somehow.

As part of his Employment Agreement Cosmopolitan CEO John Unwin was to be awarded a $4,500,000 retention bonus should the property be sold within 4 years of opening. Drinks on Unwin!

Blackstone recently completed a major investment in Crocs footwear, does this spell doom for Cosmo's CRSVR shop. They also own Duncan Hines, Van De Kamp's, Mrs. Paul's, Mrs. Butterworth AND Aunt Jemima!!!

Here's Blackstone Private Equity exec Joe Baratta explaining the company philosophy:

More on this as it develops... here's the story from The New York Times.

Don't tear up your tickets folks!



Tagged: cosmopolitan   blackstone   



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Comments & Discussion:

Interesting, from my limited understanding will Blackstone likely have to bring in someone to run the gaming operations?

I think the folks they've got are licensed and have retention contracts.

MGM made the most sense to me followed by Caesar's.

If Caesars gets this property, expect it to go down the drain very quickly. The rooms already had issues with wear and tear, imagine the wear and tear with deffered maintanace!

I was really hoping MGM would get them so that they could build a pedestian walk way from Cosmo to the Vidara / Bellagio walkway and make getting around City Center less of a pain!

The Leach reported that Elaine Wynn put a bid in as well, which is interesting.

^ and probably bs. he's got the worst batting average ever.

I shall henceforth refer to Cosmo was "Mr. Unwin's."

*as

"Johnnies"

I don't see this deal ultimately resulting in Caesars Entertainment ending up with Cosmo. When the Palms was taken over by TPG and Leonard Green & Partners, speculation then was that it would eventually end up as part of Caesars Entertainment via some of their common ownership.

My thinking is that Blackstone may start laying the groundwork to acquire additional resorts in Las Vegas.

More Competition = A Good Thing

I certainly wouldn't say they turned around Foxwoods and Mohegan sun.. They are still falling pretty hard..(foxwoods more so than Mohegan)

One thing is for sure...goodbye Marriott. I'm expecting to be a part of The Waldorf Astoria Collection...30,000,000 HHonors members will subsidize the Marriott losses. maybe The Conrad of Las Vegas? Looking forward to my eventual transfer to The Grand Wailea.

"meet the new boss...same as the old boss."

^ I was wondering if a change of name could be in the works... Especially since a Conrad was previously planned for the Strip.

I think it could be come a Waldorf or a Conrad. Waldorf just seems more likely to me as I believe it is a higher tier. It also has more brand recognition.

Tossed Waldorf salads for everyone!

I still maintain that MGM absorption is the only hope for success. Max revenue rooms, nightlife, F&B and entertainment are already there, so it must be viewed as a tool to help maximize gaming revenue at Bellagio, Aria and Monte Carlo. Seen as a brick in the wall, it's vital. Seen as a stand alone, it's an albatross.

Tossed Walforf salads and beer cans from the balconies! Screw you Jockey Club! Woooo, party, woooo!

Its a shame Packer/Crown didnt get it, wouldve liked to see people who know gaming running it. Now its going from one wall street firm to another who will just flip it to someone else for $4 billion in a year.

Mrs. Butterworth's? Maybe their new slogan can be "Just the right amount of pancakes". It makes more sense than the current ad.

That's a damn lot of money. Woner when the changes are going to start? The dining part of the hotel is where all the money is being spent by guets and non guests alike

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