N.J. casino panel backs Harrah’s takeover deal

ATLANTIC CITY - The New Jersey Casino Control Commission gave unanimous approval today for two private-equity firms to purchase Harrah's Entertainment Inc. for $27.8 billion.

The 5-0 vote, after a 21/2-hour hearing here, supported the joint bid by Apollo Management L.P. and Texas Pacific Group. Harrah's owns four casinos here and six in Las Vegas.

Gary Loveman, Harrah's chairman, president and chief executive officer, said at today's hearing that the management and operations of the company would remain the same. He said he would remain chief executive.

Apollo, of New York, and Texas Pacific, of Fort Worth, Texas, said in December that they planned to buy Harrah's. The price for the Las Vegas company includes the assumption of about $10.7 billion of debt.

Harrah's owns more than 50 properties worldwide that include casinos on land and in ships, and a golf course in Macao in South China. Loveman said an independent committee appointed by Harrah's board to review the deal supported it, and the board has approved the sale.

Apollo and Texas Pacific "bring a considerable expertise, particularly with respect to how we think about and allocate capital," Loveman said at the hearing.

He said they would advise Harrah's on what "sorts of companies we can do business with, and how we can structure commercial relationships that are advantageous to the business."

The deal, expected to close in December or early 2008, reflects the growing role of private-equity firms in the gaming industry.

In June, casino and racetrack operator Penn National Gaming Inc., of Wyomissing, Pa., said it agreed to be acquired by funds managed by affiliates of Fortress Investment Group L.L.C. and Centerbridge Partners L.P. for about $8.9 billion in cash.

A Penn National spokesman said today that the deal was expected to close in mid-June.

Wall Street analysts said the Harrah's deal should move forward easily.

"I never expected this deal to not close," said gambling analyst Larry Klatzkin, managing director of investment firm Jefferies & Co. Inc., of New York.

"I don't know what their [Apollo's-Texas Pacific's] objective is with these assets," Klatzkin said. "Harrah's keeps announcing new projects on a regular basis . . . so I don't suspect anything is going to be different."

The company owns Harrah's, Bally's, Showboat and Caesars here. Among its projects are a 961-room, 44-story hotel tower, called Harrah's Waterfront Hotel, that the company plans to open by May in the Marina District next to a rival, the Borgata Hotel Casino & Spa.

Loveman said the company would not divest any of its Atlantic City assets, which generate one-third of Harrah's cash flow. Now, he said, the focus is on the center of the Boardwalk casinos, Caesars and Bally's.

Commission chairwoman Linda Kassekert peppered representatives of the two private firms with questions today. The commission's role is to certify the suitability and finances of the proposed buyers.

"Why gaming?" she asked Apollo partner Rick Press.

"Gaming has transitioned into a much more mainstream form of entertainment," Press said. "It's a model that we understand."

Press cited Vail Resorts Inc. as an example of his company's knowledge of developing destination-type attractions. Vail Resorts owns the Vail, Beaver Creek, Keystone and Breckenridge ski areas in Colorado. Apollo is its majority shareholder.

Kelvin Davis, a senior partner with Texas Pacific Group, praised Harrah's national network of casinos and its management team behind Loveman.

"We believe there is an opportunity for future growth in this company," he told the board. Texas Pacific also has investments in airlines, banks and utilities.

New Jersey is the first jurisdiction to review the deal. The gaming boards of the 11 other markets where Harrah's owns casinos, including Nevada, must also sign off on the transaction.

Shares of Harrah's closed at $88.29 today, up 50 cents, on the New York Stock Exchange.