Big deal

I’m out of the office for a day, and two HUGE stories break: Congress passes an Internet gaming ban, and the world’s biggest gaming company might be bought out. Adding to the fun, Harrah’s and Boyd swap land, paving the way for Harrah’s redevelopment of its center Strip holdings. Here’s the HET buyout, from AP:

Harrah’s Entertainment received a $15.05 billion offer for the company from two private-equity firms in what would be the biggest deal ever for a casino operator and the fifth-largest leveraged buyout in history.

Harrah’s said Monday that Apollo Management and Texas Pacific Group are offering $81 per share in cash, a 22 percent premium to Harrah’s closing stock price Friday on the New York Stock Exchange.

Harrah’s shares surged $9.25, or 13.9 percent, to close at $75.68 on Monday on the New York Stock Exchange.

Harrah’s said it had not committed to the deal, but it established a special committee of independent directors to review the offer and retained UBS Securities LLC as an adviser.

The company did not respond to calls for comment.

Harrah’s operates about 40 casinos throughout the country, including Caesars Palace in Las Vegas, and other casinos under the names Ballys, Horseshoe and Showboat. The Las Vegas-based company beefed up its portfolio with last year’s purchase of Caesars Entertainment Inc., giving it an upscale offering on the Las Vegas Strip.

Also on Monday, Harrah’s said it entered into a deal with a unit of Boyd Gaming Corp. to exchange about 24 acres that Harrah’s controls on the Las Vegas Strip for Boyd’s Barbary Coast Hotel and Casino.

The Barbary Coast has long been sought by Harrah’s because it is on 4.4 acres on the Strip between several Harrah’s properties, including Imperial Palace, Flamingo, Ballys and Paris.

It was the last major piece of property standing in the way of a massive redevelopment project linking Harrah’s holdings on the Strip, which the company was to announce before the end of the year.

Boyd Gaming spokesman Rob Stillwell said the straight-swap deal would give Boyd 87 contiguous acres on the Strip, of which it had already assembled 63 acres on the Stardust casino-hotel site for a planned $4 billion megaresort called Echelon Place.
Harrah’s Gets $15 Billion Buyout Offer

The Barbary Coast deal isn’t that much of a surprise, though I was thinking that maybe Boyd and Harrah’s would go the Borgata route, having the two companies share ownership whatever is going to be built there. But that isn’t going to happen, and both parties will benefit from this land swap.

As far as the buyout, I don’t know how much this will affect the company’s strategy and operations. The company’s value isn’t in its casinos themselves as much as its brand strength and marketing (Total Rewards). I’m no financial whiz, but it seems that Harrah’s is a company where the whole is more than the sum of the part, so breaking up the company doesn’t make that much sense to me. This is an industry where consolidation and diversification have been the major trends, and I haven’t seen much to convince me that there’s money to be made in bucking the trend.

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