Proposed Eldorado Transaction

9 Months Ended

Nov. 30, 2013

Business Combinations [Abstract]

Proposed Eldorado Transaction

Proposed Eldorado Transaction

On September 9, 2013, Eldorado and MTR Gaming Group, Inc. (“MTR”), a publicly traded company, announced that they had entered into a definitive agreement (the “Combination Agreement”), which provides for the combination of MTR and Eldorado in a stock merger with a cash election option offered to MTR’s current stockholders. On November 18, 2013, Eldorado and MTR entered into Amendment No. 1 to the Combination Agreement, which increased the cash election option per share amount from $5.15 to $6.05 and increased the aggregate amount available for the purchase of shares pursuant to the cash option from $30 million to $35 million, with the $5 million increase to be funded by Eldorado utilizing its cash on hand. MTR’s remaining common shares will be exchanged for shares in the combined new company, which is to be publicly traded under the name Eldorado Resorts, Inc. (“New Eldorado”).

Under the terms of the Combination Agreement, as amended, the transaction value of Eldorado will be determined by Eldorado’s adjusted EBITDA for the twelve-month period specified in the Combination Agreement multiplied by 6.81, less net debt and other adjustments. Based on Eldorado’s adjusted EBITDA for the twelve-month period ended September 30, 2013 (including its interest in Silver Legacy), Eldorado’s owners, including the Company, would receive in exchange for their current interests in Eldorado, an aggregate of approximately 35.6 million shares, or approximately 55% of the total shares, in New Eldorado valued at $6.05 per share. These valuation metrics and the Company’s percentage ownership interest in Eldorado would yield a value to the Company that exceeds the Company’s current carrying value of its investment in Eldorado. Based upon this calculation, the Company would at closing acquire ownership of between 9% and 10% of New Eldorado, depending on the number of shares purchased pursuant to the cash option. The closing of the proposed transaction is subject to a number of conditions. The Company is unable to determine at this time the impact on the Company if the transactions contemplated by the Combination Agreement are consummated. The foregoing discussion is qualified in its entirety by reference to the Combination Agreement and to Amendment No. 1 to the Combination Agreement, copies of which are included as exhibits to this report.