Harrah's Entertainment May Have New Owner
Staff -- Tradeshow Week, 1/15/2007
Just four days before Christmas, Harrah's Entertainment accepted an all-cash buyout offer from Apollo Management and Texas Pacific Group. The $17.1 billion offer is in addition to $10.7 billion in debt that would be assumed, amounting to $90 in cash per outstanding share for Harrah's stockholders.
Apollo and Texas Pacific tendered their first, $15.1 billion bid for Harrah's in early October. Since then, observers have wondered how the possible sale would affect the company's plans for development along the Las Vegas Strip.
After this fall's property swap with Boyd Gaming, Harrah's owns about 350 acres on or near the Strip. The company's seven Las Vegas casino hotels encompass more than 1 million square feet of meeting and exhibit space and 17,000 rooms.
But competitors are nipping at the top dog's heels. MGM Mirage (owner of Mandalay Bay Resort & Casino with 934,731 sq. ft. of exhibit space) has begun construction of its $7 billion, mixed-use development, Project CityCenter. The 18 million sq. ft. of buildings, slated for a 2009 opening, will contain an as-yet undetermined amount of convention space. Up the Strip, Boyd Gaming is making plans for Echelon Place, a $4 billion, four-hotel complex expected to open by 2010. At last report, Echelon was to include a 650,000 sq. ft. convention center.
At this time last year, Harrah's was telling investors and the media to expect news of its Strip development plans in the summer, but bids to buy the company put off that announcement. Analysts from firms like Susquehanna Financial Group and publications like the Wall Street Journal are now wondering publicly whether the pending buyout will put Harrah's too far in debt to continue its expansion. Some even speculate that the company might shed some assets and staff to help pay down what will amount to a $21 billion debt after the deal closes.
The current deal with Apollo and Texas Pacific must close by March 1, 2008. Harrah's has until Jan. 15 to entertain better offers, after which either side faces a $500 million penalty for backing out.
