By Brett Cole and Oliver Staley
Bloomberg News
With PBN Reports
Harrah’s Entertainment Inc. – the world’s largest casino operator and the Narragansett Indian Tribe’s partner in a proposed West Warwick casino that is on the Rhode Island ballot for the Nov. 7 general election – this morning confirmed it has received a $15.1 billion takeover offer.
The offer, from venture-capital firms Apollo Management and Texas Pacific Group, launched the casino company’s stock on its biggest rise in almost eight years
Harrah’s board is reviewing the $81-a-share offer, the Las Vegas-based company said in a statement on Business Wire today. A committee of non-management directors said there’s no assurance the company will agree to a deal because it “has not determined that a transaction is in the best interests of Harrah’s and its stockholders.”
Apollo, co-founded by Leon Black, and Texas Pacific may be drawn to an industry where annual revenue has almost doubled in the past decade, rising to $30.5 billion last year from $17 billion in 1995. Harrah’s derives much of its profit from casinos and hotels in Las Vegas and Atlantic City, New Jersey, and is aiming to add properties overseas after losing a bid to operate a casino in Singapore.
“Right now Harrah’s is certainly one of the better-run companies,” said Rod Petrik, an analyst with Stifel Nicolaus & Co. “They manage their customer loyalty program better than anybody. Its systems are state-of-the-art. It’s a matter of perhaps what the private-equity firms can do to help the company grow internationally.”
Black’s New York office said he was out of the office observing Yom Kippur. Texas Pacific spokesman Owen Blicksilver didn’t immediately respond to a call seeking comment.
Harrah’s spokesman Alberto Lopez also didn’t immediately return calls seeking comment.
The cash offer was reported in today’s Wall Street Journal. Including Harrah’s $10 billion in debt, the proposed takeover would be the third-biggest leveraged buyout this year, behind HCA Inc. and Kinder Morgan Inc., the newspaper said.
At 10:12 a.m. Monday, Harrah’s stock was up $9.07, or 14 percent, to $75.50, in New York Stock Exchange composite trading. By 4:01 p.m., it was trading at $75.68 per share. Last week, Harrah’s stock had been trading at 19 percent below its May 10 record of $82.33, as development costs rose more than investors expected.
Harrah’s has increased its profits in each of the previous 10 quarters, save the third quarter last year, when it closed four casinos following Hurricanes Katrina and Rita. For the second quarter of this year, its posted income was up 22 percent, to $128.6 million, as revenues climbed 67 percent to $2.37 billion. The company’s third-quarter results are due Oct. 25.
Additional company information can be found at www.harrahs.com, under “Investor Relations.”
