Harrah's Bets on Horseshoe

by Jeff Simpson

Las Vegas-based Harrah's Entertainment has reached a $1.4 billion deal to buy Jack Binion's Horseshoe Gaming Holdings Corp., informed sources said Wednesday.

The companies are expected to announce the deal today.

Harrah's, the nation's most profitable and geographically diverse casino operator, will acquire Binion's riverboat casinos in Hammond, Ind.; Bossier City, La.; and Tunica, Miss., the sources said.

The three casinos are "the Mirages of their markets, undeniably the best properties in their respective cities, by far the most profitable," one informed source said.

The expected sale price is slightly more than the $1.39 billion Ameristar Casinos reportedly offered Binion last month, and would make the acquisition one of the biggest gaming company mergers in recent years. The deal would rank behind MGM Grand's $6.4 billion purchase of Mirage Resorts in 2000 and Park Place Entertainment's $3 billion purchase of Caesars World in 1999.

It would also be Harrah's fifth major casino purchase since 1998, when it began its buying spree with the purchase of the Showboat for $550 million. Harrah's also bought the Rio for $888 million in 1999, Players International for $425 million in 2000 and Harveys Casino Resorts for $675 million in 2001.

"(Harrah's CEO) Gary Loveman can borrow for less than anyone else, and he looks at everything that's on the market," a Wall Street source explained.

Binion moved Horseshoe Gaming's headquarters to Las Vegas a few months ago. His 7,800-worker, $840 million annual revenue company is unrelated to Binion's Horseshoe in downtown Las Vegas.

Binion ran the Fremont Street property until 1998, when he sold most of his stake in the property to his sister Becky Binion Behnen. Binion still owns a small slice of the downtown casino as a way to maintain his Nevada gaming license.

Loveman was unavailable Wednesday for comment.

Horseshoe executives and Ameristar spokeswoman Kathy Callahan did not return Wednesday phone messages. Harrah's spokesman Gary Thompson cited company policy and declined to comment about the reported sale.

The Wall Street source wondered why Harrah's would buy Horseshoe because the two companies compete in two of the company's markets.

Harrah's East Chicago casino is just across the state line from Horseshoe's Hammond riverboat and Harrah's Shreveport boat is visible from the Bossier City Horseshoe, the source said.

Harrah's also operates a nearby racino, Louisiana Downs.

"Why would they want that kind of overlap?" the source said of the Chicago and northern Louisiana markets. "It just doesn't make sense."

The source also questioned whether Harrah's was repeating a mistake it made when it bought the Rio.

"Jack Binion takes big bets and his properties cater to real high rollers," the source said. "When Harrah's bought the Rio, they had big problems with its high-end business."

One top Las Vegas casino executive speculated that Loveman may intend to sell one of the two Louisiana boats.

One Horseshoe Gaming employee, who asked not to be identified by name, Wednesday said workers were informed last week that offers from both Harrah's and Ameristar were due Sept. 5 and that they should expect word of a decision late this week.

The source said "all signs have pointed toward Harrah's" being named the company's preferred buyer, with many workers having already begun looking for new jobs.

"They told us if Harrah's is the (winning bidder), they like to do things their own way and likely wouldn't hire as many people" from Horseshoe Gaming, the source said. "Everyone has been worried about whether we would have jobs."

Harrah's shares closed at $39.87 Wednesday, up 21 cents, or 0.53 percent.

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