Harrah's Entertainment in buyout talks
By William Spain, MarketWatch
Last Update: 3:51 PM ET Oct 2, 2006
<LABEL class=StoryContent id=StoryContent_Content>CHICAGO (MarketWatch) -- Shares of Harrah's Entertainment Inc. rolled sharply higher Monday, gaining more than 16%, after the gambling giant confirmed it received a $15 billion buyout offer from a private-equity group.
The $81-a-share bid from Apollo Management and Texas Pacific Group is a 22% premium to Harrah's Friday closing price of $66.42. The shares were up 16% at $77.25 in morning trading.
The Las Vegas casino operator said its board formed a committee of nonmanagement directors to review the proposal. Harrah's hired UBS Securities as its financial adviser and Kaye Scholer as its legal adviser.
"The special committee has not determined that a transaction is in the best interests of Harrah's and its stockholders or that Harrah's should not continue as an independent public company," the company said.
It also said that there is no assurance that any takeover deal will be completed.
A deal for Harrah's (HET Harrah's Entertainment, Inc.
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<IMG class=pixelTracking height=1 width=1 border=0>HET ) would represent the biggest foray yet by private equity investors into the gambling sector; only Colony Capital has significant investments in the industry. Harrah's vaulted into the No.1 spot in the industry, passing MGM Mirage (MGM MGM Mirage
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<IMG class=pixelTracking height=1 width=1 border=0>MGM ) , when it bought Caesars Entertainment last year.
"If this transaction were, in fact, to consummate, I would have great concern," said Joseph Weinert, vice president of Spectrum Gaming Group, an industry consulting firm. "You would have a company that has yet to establish itself as a market-leading operator taking over some of the biggest and most recognized properties in both Las Vegas and Atlantic City."
Further, he continued, "casinos work best -- and local markets benefit most -- when casino companies operate casinos. A transaction such as this one could result in the Harrah's casinos becoming just another cluster of assets in a larger portfolio."
Meanwhile, S&P Equity Research reiterated its hold rating on Harrah's stock.
"Although this is modestly below the high price that the stock reached earlier this year, we do not expect a higher bid to emerge," wrote analyst Tom Graves in a note to investors. "We are surprised that [Harrah's] is a buyout target, given the large capex we expect ahead for the company."
However, he added that the company's "sizeable operating cash flows helped to attract buyout interest."
Joe Greff at Bear Stearns, "we believe that a private equity takeout...is more likely than not," as the company's board would be "hard pressed to come up with an alternative equity value creating plan...to rival this proposal."
News of the bid drove up shares of other casino operators with MGM Mirage gaining almost 4% to $41.04 while Las Vegas Sands (LVS las vegas sands corp com
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<IMG class=pixelTracking height=1 width=1 border=0>LVS ) and Penn National (PENN Penn National Gaming Inc
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<IMG class=pixelTracking height=1 width=1 border=0>PENN ) each added about 2% to $69.64 and $37.14, respectively.
Boyd Gaming (BYD Boyd Gaming Corporation
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<IMG class=pixelTracking height=1 width=1 border=0>BYD ) , which just announced a deal to sell its Barbary Coast casino on the Las Vegas Strip to Harrah's in exchange for land adjacent to its planned Echelon Place project, bounced nearly 8% to $41.42.
William Spain is a MarketWatch staff writer in Chicago.
</LABEL>
By William Spain, MarketWatch
Last Update: 3:51 PM ET Oct 2, 2006
<LABEL class=StoryContent id=StoryContent_Content>CHICAGO (MarketWatch) -- Shares of Harrah's Entertainment Inc. rolled sharply higher Monday, gaining more than 16%, after the gambling giant confirmed it received a $15 billion buyout offer from a private-equity group.
The $81-a-share bid from Apollo Management and Texas Pacific Group is a 22% premium to Harrah's Friday closing price of $66.42. The shares were up 16% at $77.25 in morning trading.
The Las Vegas casino operator said its board formed a committee of nonmanagement directors to review the proposal. Harrah's hired UBS Securities as its financial adviser and Kaye Scholer as its legal adviser.
"The special committee has not determined that a transaction is in the best interests of Harrah's and its stockholders or that Harrah's should not continue as an independent public company," the company said.
It also said that there is no assurance that any takeover deal will be completed.
A deal for Harrah's (HET Harrah's Entertainment, Inc.
News , chart, profile, more
Delayed quote data
Sponsored by:
<IMG class=pixelTracking height=1 width=1 border=0>HET ) would represent the biggest foray yet by private equity investors into the gambling sector; only Colony Capital has significant investments in the industry. Harrah's vaulted into the No.1 spot in the industry, passing MGM Mirage (MGM MGM Mirage
News , chart, profile, more
<IMG class=pixelTracking height=1 width=1 border=0>MGM ) , when it bought Caesars Entertainment last year.
"If this transaction were, in fact, to consummate, I would have great concern," said Joseph Weinert, vice president of Spectrum Gaming Group, an industry consulting firm. "You would have a company that has yet to establish itself as a market-leading operator taking over some of the biggest and most recognized properties in both Las Vegas and Atlantic City."
Further, he continued, "casinos work best -- and local markets benefit most -- when casino companies operate casinos. A transaction such as this one could result in the Harrah's casinos becoming just another cluster of assets in a larger portfolio."
Meanwhile, S&P Equity Research reiterated its hold rating on Harrah's stock.
"Although this is modestly below the high price that the stock reached earlier this year, we do not expect a higher bid to emerge," wrote analyst Tom Graves in a note to investors. "We are surprised that [Harrah's] is a buyout target, given the large capex we expect ahead for the company."
However, he added that the company's "sizeable operating cash flows helped to attract buyout interest."
Joe Greff at Bear Stearns, "we believe that a private equity takeout...is more likely than not," as the company's board would be "hard pressed to come up with an alternative equity value creating plan...to rival this proposal."
News of the bid drove up shares of other casino operators with MGM Mirage gaining almost 4% to $41.04 while Las Vegas Sands (LVS las vegas sands corp com
News , chart, profile, more
Delayed quote data
Sponsored by:
<IMG class=pixelTracking height=1 width=1 border=0>LVS ) and Penn National (PENN Penn National Gaming Inc
News , chart, profile, more
Delayed quote data
Sponsored by:
<IMG class=pixelTracking height=1 width=1 border=0>PENN ) each added about 2% to $69.64 and $37.14, respectively.
Boyd Gaming (BYD Boyd Gaming Corporation
News , chart, profile, more
Delayed quote data
Sponsored by:
<IMG class=pixelTracking height=1 width=1 border=0>BYD ) , which just announced a deal to sell its Barbary Coast casino on the Las Vegas Strip to Harrah's in exchange for land adjacent to its planned Echelon Place project, bounced nearly 8% to $41.42.
William Spain is a MarketWatch staff writer in Chicago.
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