kermit16 said:
When a smaller company buys out a larger company, it's called a "leveraged buyout."
The smaller company borrows a bunch of money, buys another company, and uses the new company as collateral against the debt. The new company then pays off the loan with profits from the newly formed company.
Leveraged buyouts were very popular during the 80's but have become harder to pull off in this day and age.
Kermit,
Just so you aren't misinformed, it is the two private equity companies buying not the smaller Penn National. They are not smaller by any stretch of the imagination.
WC,
I read the paper online, don't know how I missed that unless it is in the Sun section. I'll go back and look at it.
I agree both as a consumer and employee that we are all hopeful they will make some more player-friendly changes.
Just so you aren't misinformed, it is the two private equity companies buying not the smaller Penn National. They are not smaller by any stretch of the imagination.
WC,
I read the paper online, don't know how I missed that unless it is in the Sun section. I'll go back and look at it.
I agree both as a consumer and employee that we are all hopeful they will make some more player-friendly changes.
Ah, found the article. Good read. I know exactly where that is.
Landowners stand in way of 'the gorilla'
By Ed Koch <koch@lasvegassun.com>
[SIZE=-2]Las Vegas Sun[/SIZE]
<TABLE cellSpacing=10 cellPadding=10 width=200 align=right Boder="0"><TBODY><TR bgColor=#cccccc><TD bgColor=#cccccc>HOLDOUTS
Click here for a printable graphic. </TD></TR></TBODY></TABLE>Although he's not talking about it, Oscar Nunez is literally in a position to write the next chapter of Las Vegas Strip lore.
Nunez owns six aging, cinder-block apartment buildings between Koval Lane and a stretch of the Strip where Harrah's Entertainment owns side-by-side casinos Barbary Coast, Flamingo, Harrah's, Imperial Palace and O'Sheas .
Harrah's Entertainment, the world's largest gaming company, wants to freshen up and redevelop that part of the block, a project that could cost billions of dollars - maybe more than any other project in Strip history.
To make it all work, Harrah's is buying up the property behind its casinos where private investors own time-share condos and blue-collar apartment houses.
But so far Nunez hasn't sold his French Villas apartments to Harrah's. The situation has all the makings of another great Strip showdown, the kind that has played out over the years when relatively small property owners have threatened big resorts' plans.
Probably the most notorious occurred in the 1980s, when casino owner Steve Wynn was about to redefine the Strip with the Mirage. The property Wynn wanted included a 36-unit apartment building. Its owner, Michael Flores, refused to sell.
So Wynn built around him, and the apartments stand to this day, a testament to stubbornness, tucked out of view in a back lot, sandwiched between the Mirage and Treasure Island.
The lesson: Nobody gets in the way of Strip developers. If the small guy doesn't sell - usually for a nice profit, thank you - the big guy will just build around him.
"It's an ages old process that I like to call standing in the way of the gorilla," said David Atwell, president of Resort Properties of America and one of the leading brokers of Strip acquisitions.
Atwell said a developer's plan to build or enlarge a project generally plays out in three stages: He, or his agent using a different name to disguise the plans, tries to buy sufficient land early without revealing what's up. Once that cat is out of the bag, the developer hopes for reasonable negotiations. And then, you have to deal with the hardball holdouts.
Nunez is a holdout. And the question is: Will he eventually exact his price from Harrah's or force it to build around him?
Harrah's has been tight-lipped about its redevelopment plans but its land-buying spree in the area has been no secret. It has obtained development rights to the Summer Bay Resort time-share condominiums behind the Strip and has gobbled up and bulldozed other crumbling properties in the 44-year-old Flamingo Estates subdivision.
Nunez is one of two holdouts. The other, according to Clark County assessor records, is a Beverly Hills, Calif., company that owns a six-unit apartment building.
Bob Rose, the company's Las Vegas-based property manager, hinted that there is nothing wrong with waiting for the right price on any deal, adding: "It could be sold any day now."
Calls to Nunez were not re-turned, nor did he respond to a reporter's visits to his property.
Two French Villas tenants said they've received no word about the fate of the complex, a collection of studio and one-bedroom apartments.
In fact, the French Villas, like the neighboring two-story apartment complexes that are owned by holding companies of Harrah's, are still advertising for weekly and monthly tenants.
The neighboring Desert Club Apartments has been purchased by a Harrah's holding company, according to Clark County assessor records, and are still offering tenants six-month leases - an indication nothing is going to happen right away.
Speculation is that Desert Club will become the replacement time shares for the doomed low-rise Summer Bay Resort buildings .
But change is clearly under way, and not many tears are being shed over the seemingly inevitable loss of the Flamingo Estates community.
"I'm going to miss it because it's hard to find a studio in Las Vegas for $130 a week," said Jimmy Marks, a Flamingo Estates resident for 15 years. "But it's due for a change. You go behind the Strip casinos now and you find yourself in the ghetto. That's just not going to work."
Clark County historian Mark Hall-Patton says Flamingo Estates was a far more significant neighborhood when it was built in 1962 by developer Albert Winnick.
"In the 1960s a lot of families had only one car, so if both parents were going to work, at least one had to be within walking distance of a job," Hall-Patton said. "Today because many families have multiple cars, proximity to a job is not the issue it once was for so many."
Even Nunez is an agent for change in the neighborhood. Harrah's intentions notwithstanding, Nunez has won Clark County Commission zoning approval for his own 16-story condominium tower to replace his aging apartments.
Since Nunez isn't talking, it's not known whether he is seriously pursuing those plans or trying to strengthen his negotiating position with Harrah's.
Atwell says the mere act of obtaining land-use approval for a condo high rise may have added as much as $30 million to the currently assessed $3 million value of Nunez's property. It raises questions, Atwell said, about whether Harrah's will have to rethink its plans for that part of the site or offer Nunez a wheelbarrow of money for his land.
Atwell said such a dilemma is nothing new to major Strip developers who go into such acquisitions aware they may have to pay handsomely for properties late in the game - or take other action.
"Some landowners believe they are sitting on gold mines, but if some developers cannot reach a deal with them they will simply build around the holdouts," Atwell said.
That's what happened when Wynn built around the 36-unit Villa de Flores apartments.
Wynn encountered another showdown in 2000 when he bought the Desert Inn and started buying up golf course homes in the adjacent Desert Inn Estates.
When at least 10 homeowners refused to sell , he blocked some roads in the neighborhood and built large berms behind the homes of the holdout property owners, blocking their views of the venerable golf course. A bitter four-year legal battle ended in March 2004 when the holdouts received a total of $23 million for their homes - in some cases, getting double Wynn's initial offer, according to Atwell.
Other holdouts also have commanded and raked in big numbers.
Bob Cohen fetched a premium price when he sold his Vagabond Motel to Wynn, Atwell said. Bellagio escalators now stand on the site.
Owners of the Desert Rose Motel also received a hefty price from the Monte Carlo's developers for that 2.5-acre frontage parcel, Atwell said.
Still other negotiations with holdouts have had unusual endings.
In the late 1970s, Atwell said he was quietly buying parcels to make way for the Forum Shops at Caesars. One of the last landowners in the way of the project was Louis Brauer, who found out that Caesars was behind Atwell's purchases. When Brauer drove his asking price way up, Atwell's wife cooked the elderly bachelor a Thanksgiving dinner that the couple delivered to Brauer. By meal's end, a touched Brauer agreed to sell at the going rate.
Harrah's might need not only a turkey with all the trimmings but also a generous Christmas goose to seal a deal with Nunez.
Ed Koch can be reached at 259-4090 or at koch@lasvegassun.com.
Landowners stand in way of 'the gorilla'
By Ed Koch <koch@lasvegassun.com>
[SIZE=-2]Las Vegas Sun[/SIZE]
<TABLE cellSpacing=10 cellPadding=10 width=200 align=right Boder="0"><TBODY><TR bgColor=#cccccc><TD bgColor=#cccccc>HOLDOUTS
Click here for a printable graphic. </TD></TR></TBODY></TABLE>Although he's not talking about it, Oscar Nunez is literally in a position to write the next chapter of Las Vegas Strip lore.
Nunez owns six aging, cinder-block apartment buildings between Koval Lane and a stretch of the Strip where Harrah's Entertainment owns side-by-side casinos Barbary Coast, Flamingo, Harrah's, Imperial Palace and O'Sheas .
Harrah's Entertainment, the world's largest gaming company, wants to freshen up and redevelop that part of the block, a project that could cost billions of dollars - maybe more than any other project in Strip history.
To make it all work, Harrah's is buying up the property behind its casinos where private investors own time-share condos and blue-collar apartment houses.
But so far Nunez hasn't sold his French Villas apartments to Harrah's. The situation has all the makings of another great Strip showdown, the kind that has played out over the years when relatively small property owners have threatened big resorts' plans.
Probably the most notorious occurred in the 1980s, when casino owner Steve Wynn was about to redefine the Strip with the Mirage. The property Wynn wanted included a 36-unit apartment building. Its owner, Michael Flores, refused to sell.
So Wynn built around him, and the apartments stand to this day, a testament to stubbornness, tucked out of view in a back lot, sandwiched between the Mirage and Treasure Island.
The lesson: Nobody gets in the way of Strip developers. If the small guy doesn't sell - usually for a nice profit, thank you - the big guy will just build around him.
"It's an ages old process that I like to call standing in the way of the gorilla," said David Atwell, president of Resort Properties of America and one of the leading brokers of Strip acquisitions.
Atwell said a developer's plan to build or enlarge a project generally plays out in three stages: He, or his agent using a different name to disguise the plans, tries to buy sufficient land early without revealing what's up. Once that cat is out of the bag, the developer hopes for reasonable negotiations. And then, you have to deal with the hardball holdouts.
Nunez is a holdout. And the question is: Will he eventually exact his price from Harrah's or force it to build around him?
Harrah's has been tight-lipped about its redevelopment plans but its land-buying spree in the area has been no secret. It has obtained development rights to the Summer Bay Resort time-share condominiums behind the Strip and has gobbled up and bulldozed other crumbling properties in the 44-year-old Flamingo Estates subdivision.
Nunez is one of two holdouts. The other, according to Clark County assessor records, is a Beverly Hills, Calif., company that owns a six-unit apartment building.
Bob Rose, the company's Las Vegas-based property manager, hinted that there is nothing wrong with waiting for the right price on any deal, adding: "It could be sold any day now."
Calls to Nunez were not re-turned, nor did he respond to a reporter's visits to his property.
Two French Villas tenants said they've received no word about the fate of the complex, a collection of studio and one-bedroom apartments.
In fact, the French Villas, like the neighboring two-story apartment complexes that are owned by holding companies of Harrah's, are still advertising for weekly and monthly tenants.
The neighboring Desert Club Apartments has been purchased by a Harrah's holding company, according to Clark County assessor records, and are still offering tenants six-month leases - an indication nothing is going to happen right away.
Speculation is that Desert Club will become the replacement time shares for the doomed low-rise Summer Bay Resort buildings .
But change is clearly under way, and not many tears are being shed over the seemingly inevitable loss of the Flamingo Estates community.
"I'm going to miss it because it's hard to find a studio in Las Vegas for $130 a week," said Jimmy Marks, a Flamingo Estates resident for 15 years. "But it's due for a change. You go behind the Strip casinos now and you find yourself in the ghetto. That's just not going to work."
Clark County historian Mark Hall-Patton says Flamingo Estates was a far more significant neighborhood when it was built in 1962 by developer Albert Winnick.
"In the 1960s a lot of families had only one car, so if both parents were going to work, at least one had to be within walking distance of a job," Hall-Patton said. "Today because many families have multiple cars, proximity to a job is not the issue it once was for so many."
Even Nunez is an agent for change in the neighborhood. Harrah's intentions notwithstanding, Nunez has won Clark County Commission zoning approval for his own 16-story condominium tower to replace his aging apartments.
Since Nunez isn't talking, it's not known whether he is seriously pursuing those plans or trying to strengthen his negotiating position with Harrah's.
Atwell says the mere act of obtaining land-use approval for a condo high rise may have added as much as $30 million to the currently assessed $3 million value of Nunez's property. It raises questions, Atwell said, about whether Harrah's will have to rethink its plans for that part of the site or offer Nunez a wheelbarrow of money for his land.
Atwell said such a dilemma is nothing new to major Strip developers who go into such acquisitions aware they may have to pay handsomely for properties late in the game - or take other action.
"Some landowners believe they are sitting on gold mines, but if some developers cannot reach a deal with them they will simply build around the holdouts," Atwell said.
That's what happened when Wynn built around the 36-unit Villa de Flores apartments.
Wynn encountered another showdown in 2000 when he bought the Desert Inn and started buying up golf course homes in the adjacent Desert Inn Estates.
When at least 10 homeowners refused to sell , he blocked some roads in the neighborhood and built large berms behind the homes of the holdout property owners, blocking their views of the venerable golf course. A bitter four-year legal battle ended in March 2004 when the holdouts received a total of $23 million for their homes - in some cases, getting double Wynn's initial offer, according to Atwell.
Other holdouts also have commanded and raked in big numbers.
Bob Cohen fetched a premium price when he sold his Vagabond Motel to Wynn, Atwell said. Bellagio escalators now stand on the site.
Owners of the Desert Rose Motel also received a hefty price from the Monte Carlo's developers for that 2.5-acre frontage parcel, Atwell said.
Still other negotiations with holdouts have had unusual endings.
In the late 1970s, Atwell said he was quietly buying parcels to make way for the Forum Shops at Caesars. One of the last landowners in the way of the project was Louis Brauer, who found out that Caesars was behind Atwell's purchases. When Brauer drove his asking price way up, Atwell's wife cooked the elderly bachelor a Thanksgiving dinner that the couple delivered to Brauer. By meal's end, a touched Brauer agreed to sell at the going rate.
Harrah's might need not only a turkey with all the trimmings but also a generous Christmas goose to seal a deal with Nunez.
Ed Koch can be reached at 259-4090 or at koch@lasvegassun.com.
The only problem is for us gamblers, is that they are keeping the same Harrahs management team. And when a new company comes in, they like to get some of their money back right away. So that could mean two things. Either they lower the payouts to even worse odds than Harrahs has lowered them to, OR they start selling off the properties like the RIO and Caesers to bring in capital to build that monstrosity that will run from the IP to the Barbary Coast! They are going to have to raise money somehow, so I think selling some properties might be the obvious choice. I hope so because I'd like to get the RIO and Caesers back to what they once were before Harrahs.
Stuckinvegas,
As a consumer I completely agree with you. The best thing that could happen is they sell off some of the periphery properties and fresh blood is injected into this oligopolist town.
Anyone that remembers the Rio back in the days Marnell owned it, knows that is was THE place for everything.
As a consumer I completely agree with you. The best thing that could happen is they sell off some of the periphery properties and fresh blood is injected into this oligopolist town.
Anyone that remembers the Rio back in the days Marnell owned it, knows that is was THE place for everything.
Harrah’s accepts $17.1 billion takeover bid
World's largest casino company to be owned by two private equity groups
LAS VEGAS - Harrah’s Entertainment Inc., the world’s largest casino company, said Tuesday that its board has accepted a $17.1 billion buyout offer from two private equity groups.
The board approved a $90 a share buyout offer from Apollo Management Group and Texas Pacific Group and recommended shareholder approval even as the company reserved the right to pursue even higher bids for about a month.
The buyers are also assuming $10.7 billion in debt in the deal.
It would be the largest going-private deal ever for a publicly held casino company and the seventh biggest leveraged buyout deal of any kind of company.
The $90 a share buyout offer was a 36 percent premium over Harrah’s closing price on Sept. 29. That was the last trading day before the casino company announced Apollo Managment and Texas Pacific had offered $81 per share Oct. 2 to take the company private.
A special committee of Harrah’s board, which excluded chief executive and chairman Gary Loveman, had been meeting in New York since last week after the company set a Tuesday deadline to receive offers.
Harrah’s said the deal was expected to be completed in about a year, but said its special committee would continue to solicit third parties for a possible higher bid for the next 25 days.
“In Apollo and TPG, we will have owners who share our vision for Harrah’s, are fully supportive of our current strategy and are committed to helping us execute on it,” Loveman said in a statement. “This will be a change in ownership, not a change in direction.”
Texas Pacific founding partner David Bonderman said he believed the private equity pairing would be able to “help Harrah’s deliver on its growth strategy” with a long-term perspective.
The group made no immediate mention of large scale redevelopment plans in Las Vegas and Atlantic City, N.J., which Harrah’s had previously said it would unveil by early next year.
Harrah’s shares rose 12 cents to $82.30 Tuesday on the New York Stock Exchange before trading was halted for news of the deal which came after the markets closed.
The deal for Harrah’s, excluding debt, ranks as the seventh largest leveraged buyout in history, according to Thomson Financial. The largest ever was RJR Nabisco Inc.’s $25 billion acquisition by Kohlberg Kravis Roberts & Co. in 1998.
Harrah’s is the world’s largest casino company by revenue, operating 39 casinos nationwide, including Caesars Palace, Bally’s and Paris on the Las Vegas Strip, and Caesars and Harrah’s in Atlantic City, N.J. It also has interests in Casino Windsor in Canada, to be renamed Caesars Windsor in early 2008, and Conrad Punta del Este in Uruguay.
By year’s end, Harrah’s is to acquire all the shares in U.K.-based London Clubs International PLC, which operates seven casinos in the U.K., two in Egypt, one in South Africa and is a consultant for a casino in Lebanon.
Harrah’s also is pursuing projects in Singapore, the Bahamas, Spain and Slovenia.
World's largest casino company to be owned by two private equity groups
LAS VEGAS - Harrah’s Entertainment Inc., the world’s largest casino company, said Tuesday that its board has accepted a $17.1 billion buyout offer from two private equity groups.
The board approved a $90 a share buyout offer from Apollo Management Group and Texas Pacific Group and recommended shareholder approval even as the company reserved the right to pursue even higher bids for about a month.
The buyers are also assuming $10.7 billion in debt in the deal.
It would be the largest going-private deal ever for a publicly held casino company and the seventh biggest leveraged buyout deal of any kind of company.
The $90 a share buyout offer was a 36 percent premium over Harrah’s closing price on Sept. 29. That was the last trading day before the casino company announced Apollo Managment and Texas Pacific had offered $81 per share Oct. 2 to take the company private.
A special committee of Harrah’s board, which excluded chief executive and chairman Gary Loveman, had been meeting in New York since last week after the company set a Tuesday deadline to receive offers.
Harrah’s said the deal was expected to be completed in about a year, but said its special committee would continue to solicit third parties for a possible higher bid for the next 25 days.
“In Apollo and TPG, we will have owners who share our vision for Harrah’s, are fully supportive of our current strategy and are committed to helping us execute on it,” Loveman said in a statement. “This will be a change in ownership, not a change in direction.”
Texas Pacific founding partner David Bonderman said he believed the private equity pairing would be able to “help Harrah’s deliver on its growth strategy” with a long-term perspective.
The group made no immediate mention of large scale redevelopment plans in Las Vegas and Atlantic City, N.J., which Harrah’s had previously said it would unveil by early next year.
Harrah’s shares rose 12 cents to $82.30 Tuesday on the New York Stock Exchange before trading was halted for news of the deal which came after the markets closed.
The deal for Harrah’s, excluding debt, ranks as the seventh largest leveraged buyout in history, according to Thomson Financial. The largest ever was RJR Nabisco Inc.’s $25 billion acquisition by Kohlberg Kravis Roberts & Co. in 1998.
Harrah’s is the world’s largest casino company by revenue, operating 39 casinos nationwide, including Caesars Palace, Bally’s and Paris on the Las Vegas Strip, and Caesars and Harrah’s in Atlantic City, N.J. It also has interests in Casino Windsor in Canada, to be renamed Caesars Windsor in early 2008, and Conrad Punta del Este in Uruguay.
By year’s end, Harrah’s is to acquire all the shares in U.K.-based London Clubs International PLC, which operates seven casinos in the U.K., two in Egypt, one in South Africa and is a consultant for a casino in Lebanon.
Harrah’s also is pursuing projects in Singapore, the Bahamas, Spain and Slovenia.
With Echelon supposedly not getting a ton of interest and the market about to be saturated with City Center, it wouldn't surprise me a bit if the new ownership just sits on the land they have. I could see them selling off the Rio to Penn National and maybe the Ballys/Paris combo to someone else, but otherwise I think they will go status quo for some time. Construction has gotten way out of hand in cost due to City Center going up and Palazzo and second phase of Wynn being built, enough that it scared off the redevelopment of the Tropicana. In 5 years time the land probably will be worth about the same or more, but the construction cost and lack of new properties will give them a better window of opportunity.
As for our selfish interests, probably means GD and his IP won't be tumbling down for awhile. Lets all toast that.
As for our selfish interests, probably means GD and his IP won't be tumbling down for awhile. Lets all toast that.
