Harrah’s Offer From Buyout Firms Raised to $15.5 Billion

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

The New York Sun

Apollo Management LP and Texas Pacific Group raised their offer for Harrah’s Entertainment Inc. to $15.5 billion after the company’s board rejected their first bid, people familiar with the situation said.

The buyout firms increased their offer for Harrah’s, the world’s biggest casino company, to $83.50 a share from $81, said the people, who declined to be identified because the proposal isn’t being publicly disclosed. The firms would also guarantee Harrah’s 40-cent quarterly dividend through 2007 to entice investors, one person said.

An acquisition of Harrah’s would be the biggest ever in the casino industry, topping the company’s own purchase last year of Caesars Entertainment Inc. Harrah’s, owner of hotels including Bally’s and the Flamingo, is the target of buyout firms because its shares are cheap given the amount of cash that flows through its casinos, said CRT Capital Group LLC’s Steve Ruggiero.

“It makes sense,”said Mr. Ruggiero.”I was fully expecting that they would have to come through with a higher bid.”

Harrah’s spokesman Alberto Lopez declined to comment. Apollo spokesman Steve Anreder and Texas Pacific’s Owen Blicksilver also wouldn’t comment.

The higher bid was reported earlier today by the New York Times. The shares fell 12 cents to $76.27 at 12:08 p.m. in New York Stock Exchange composite trading. The bid is 26% above the closing share price on September 29, the last trading day before the first offer was announced.

Harrah’s stock trades at 8.2 times 2007 earnings before interest, taxes, depreciation, and amortization, Mr. Ruggiero said.

MGM Mirage, the world’s second-biggest casino company, trades at nine times ebitda, while Wynn Resorts Ltd. has a 16.1 multiple and Las Vegas Sands Corp. trades at 23.9 times, Mr. Ruggiero said.

Harrah’s stock yesterday closed 7.2% below its May 10 record of $82.33. The company has increased profit in each of the previous 10 quarters except one, when it closed four casinos in the American Gulf Coast following hurricanes Katrina and Rita in 2005. Second-quarter net income climbed 22 percent to $128.6 million as revenue jumped 67% to $2.37 billion.

Harrah’s had $7.1 billion in revenue in 2005. It is opening or owns more than 40 properties in 13 states, the Bahamas, Spain and Slovenia. The company is planning a major redevelopment of its Las Vegas Strip properties to compete with new, high-end casinos from Wynn, Las Vegas Sands and MGM Mirage.

Harrah’s is also expanding with casinos in Chester, Pennsylvania, and is proposing a casino in Rhode Island in partnership with the Narragansett tribe. In August, Harrah’s made a 279.3 million pound ($532 million) bid for British casino company London Clubs International Plc.

Harrah’s said on October 6 it was dropping its bid with partner Keppel Land Ltd. to win a concession for a casino and resort on Singapore’s Sentosa Island, one of two casino franchises authorized by the city-state. Harrah’s lost the bidding for the first Singapore casino to Las Vegas Sands in May.

Apollo was founded by Leon Black, the former co-head of corporate finance at now-defunct Drexel Burnham Lambert Inc., the top underwriter of high-yield corporate debt before the firm collapsed in 1990. Mr. Black, 55, founded Apollo Management that year and has since made equity investments of more than $16 billion.

Texas Pacific created the world’s second-biggest buyout fund this year, raising $15 billion.


The New York Sun

© 2025 The New York Sun Company, LLC. All rights reserved.

Use of this site constitutes acceptance of our Terms of Use and Privacy Policy. The material on this site is protected by copyright law and may not be reproduced, distributed, transmitted, cached or otherwise used.

The New York Sun

Sign in or  Create a free account

or
By continuing you agree to our Privacy Policy and Terms of Use