Harrah’s Buys Showboat for $519M
LAS VEGAS (AP) _ Harrah’s Entertainment Inc. has agreed to buy rival casino owner Showboat Inc. for $519 million in a deal that will make it the world’s biggest gambling company.
A top industry watcher expects more deals in 1998.
Harrah’s announced Friday it would buy Showboat for $30.75 a share in cash. That was a healthy 45 percent premium over Showboat’s closing price Thursday. It is also assuming Showboat debt of $635 million.
Wall Street pushed the stock prices of both companies higher. Showboat gained $8.4375 a share to $29.5625 in trading on the New York Stock Exchange while Harrah’s added $1 a share to $18.1875.
Harrah’s is getting control of an additional four casinos, giving it a total of 20 casinos in 15 markets.
The deal will expand Harrah’s base of customers and raise its profile in Atlantic City, N.J., and suburban Chicago.
The company said the combination can help it reduce costs significantly by avoiding duplicated administrative costs.
``I think this is likely to trigger further consolidations in 1998,″ Jason Ader, a gambling industry analyst for Bear Stearns in New York.
He said companies are likely to make acquisitions because ``it makes more sense to buy assets than build them... There are too many gaming companies and there is no reason to be adding capacity in these competitive times.″
Harrah’s said analysts expect the company will have casino revenues alone of $2 billion in 1998 after the deal and total revenues of $2.5 billion.
Harrah’s spokesman Ralph Berry said the deal will make Harrah’s gambling operations bigger than those of any other company based on both number of properties and overall casino revenue.
Las Vegas-based Showboat owns and operates casinos in Las Vegas and Atlantic City, N.J., and is the biggest shareholder in casinos near Chicago and in Sydney, Australia.
Memphis-based Harrah’s already has casinos in Las Vegas, Reno and Lake Tahoe, Nev., Atlantic City and the Chicago area. It also has casinos in several other cities in Missouri and Mississippi.
In announcing the deal, Harrah’s said it was reconsidering how the Las Vegas Showboat casino fits with the rest of the company.
Ader said Harrah’s could be a buyer next year as well.
``They are a very substantial player,″ he said. ``I suspect you will see Harrah’s get larger through continued consolidation.″
Phoenix-based Starwood Lodging Trust agreed in November to buy ITT, parent of the Caesars gaming empire.
J. Kell Houssels, III, president and chief executive officer of Showboat, will become president of Harrah’s new Showboat division and will become a member of the Harrah’s board.
The transaction is expected to be completed in the second quarter of 1998, subject to various conditions, including regulatory approval.