Harrah’s offered $15.1 Billion to Go Private

 And because Harrah’s also has about $10 billion in long-term debt, it essentially makes this a $25 billion offer.

The deal is one of the largest proposed buyout deals of all time and if completed would give Harrah’s shareholders a huge premium of 22 percent from where the stock closed last week. The $15.1 billion bid equates to about $81 per share, or 9.7 EBITA (earnings before interest, tax, depreciation and amortization). Though Las Vegas based Harrah’s has not accepted any offers, its being reported the company has formed a committee of its non-management directors to review the proposal and has hired investment bank UBS and the law firm Kaye Scholer as advisers.

Just this week Harrah’s had announced it has successfully struck a deal with Boyd Gaming to acquire the Barbary Coast casino from the company which gives the company the final component it needed to embark on a next generation series of developments. Word is the project could rival the size and scale of the now under construction MGM Project City Center, a $7 billion dollar development also on the heart of the Las Vegas Strip.

Charles L. Atwood, vice chairman of the board for Harrah\'s said the company now controls 350 contiguous acres in the center of the world’s most profitable gaming market and will provide room for growth for years to come.

"This large site is intended to give us many years of development potential and the flexibility to grow our future earnings without undue interruption of our current earnings stream. The fact that our total site will have a cost of approximately $13 million per acre on average is strong evidence of our intention to develop this opportunity with a keen eye toward excellent returns on investment," said Atwood in a statement.

Additionally, Harrah’s is expected to announce another major development project in Atlantic City in November. In 2005 Harrah’s bought Caesars Entertainment for $6.8 billion and has also  bought companies like Horseshoe.

Harrah’s owns about 40 casinos in markets such as Las Vegas, Atlantic City, Reno, Lake Tahoe, and also operates riverboat casinos and race tracks. Last week it was awarded the right to operate a casino (slot machines only) in Pennsylvania which will open in January at an operating harness racing facility and is angling to build a $1 billion resort in Rhode Island.

At Banc of America, Securities analyst J. Cogan kept the firm's neutral-weight stance on casino operators. In an Oct. 2 research note, he wrote: "We expect the Street to begin to weigh the odds of further transactions in the gaming sector, including the potential for further private-equity interest, which could keep a bid on the stocks, as well."

Most analysts are down on the deal, saying it doesn’t make sense for the company and there is plenty of value to be had if Harrah’s simply stays the course. Harrah’s has been publicly traded since 1973, but has seen its stock decline since May.

Jeff Hwang with the Motley Fool said a deal might actually stifle the company‘s ability to grow. “A potential deal makes little sense for either Harrah's shareholders or the company in general. It merely confirms my belief that Harrah\'s shares were undervalued,” wrote Hwang in an article this week.




Jake Balzer, a leisure and entertainment analyst with Guzman & Company came to the same conclusion noting that it  makes sense Apollo and Texas Pacific are interested in the deal because of Harrah’s strong cash flow, but if ownership changes hands that cash could go to pay down debt rather than create additional profit streams.

"I don’t think it makes a lot of sense to stifle those opportunities by taking the company private," he said.

Executives at Moody's Investors Service on Monday agreed, lowering the rating outlook for Harrah's Entertainment from stable to negative. Moody's said it would place Harrah's ratings under review for possible downgrade if it agrees to be taken private.

According to Bloomberg News, the Harrah's takeover would trail the proposed $32.1 billion buyout of HCA Inc., the $31 billion purchase of RJR Nabisco Inc. in 1989 and the $27.4 billion acquisition of Kinder Morgan Inc. announced this year.

Last month luxury hotel and casino company Kerzner International went private in a $3.8 billion deal. That company owns such renowned properties as the Atlantis in the Bahamas.

© Copyright 2006 Online Casino Crawler This material may not be published, broadcast, rewritten, or redistributed.