(CelebrityAccess News Service) – Harrah's Entertainment, Inc. has signed a definitive agreement to acquire Horseshoe Gaming Holding Corp. for $1.45 billion, including assumption of debt. Privately held Horseshoe operates leading casinos in Hammond, IN; Tunica, MS; and Shreveport-Bossier City, LA. Each of Horseshoe's shareholders has committed to sell their shares, subject to customary conditions.
Harrah's also intends to sell its Harrah's brand casino in Shreveport to avoid overexposure in that market but will retain its Louisiana Downs thoroughbred horse-racing track and casino in Bossier City. Harrah's expects no other property sales related to the Horseshoe transaction.
Subject to customary approvals, the acquisition and sale are expected to close in the 2004 first quarter. After consideration of the Harrah's Shreveport sale, the Horseshoe acquisition would add a net 107,100 square feet of casino space, more than 4,360 slot machines and 138 table games to Harrah's existing portfolio of 1.53 million square feet of casino space, more than 42,000 slots and nearly 1,150 table games.
"This acquisition enhances our efforts to become the nation's leading distributor of casino entertainment and bolsters our near-term and long-term growth prospects," said Gary Loveman, Harrah's Entertainment president and CEO. "The Horseshoe franchise is a tremendous strategic fit in that its business model, like ours, is centered around gaming and providing outstanding customer service."
"Also like Harrah's, Horseshoe enjoys an enormously loyal player base and highly recognizable brand," Loveman said. "We believe our proven ability to apply sophisticated operating capabilities and drive strong cross-market play will help enrich the Horseshoe brand and benefit customers of both companies."
"This deal also demonstrates our industry-leading financial strength and flexibility, which allow us to pursue attractive growth investments and maintain our debt rating even while distributing a sizable dividend to our shareholders," Loveman said. "Coupled with our longer-term expansion prospects in both the United States and United Kingdom, the Horseshoe acquisition positions us for a decade of growth."
The acquisition is not subject to financing, and Harrah's expects to maintain its investment-grade credit rating. "At a price of about 7.2 times analysts' estimates for Horseshoe 2004 earnings before interest, taxes, depreciation and amortization, this acquisition is both fair to the sellers and is expected to be immediately accretive to our earnings," Loveman said. "In addition, within two years of closing the transaction, we expect to achieve about $36 million of annual savings from operating synergies."
"Horseshoe Gaming owner Jack Binion has created enormously popular casinos providing the high-quality amenities and superior customer service and recognition that generate lasting player loyalty," said Loveman. "We are especially pleased that Jack, who has developed personal friendships with so many of his players, has agreed to assist us with the ownership transition for the three casinos that will continue to bear the Horseshoe name."
The purchase agreement calls for Binion to provide guidance on both the integration of the Horseshoe properties into the Harrah's network and expansion of the Horseshoe brand into other markets. "In addition to retaining the Horseshoe name, the three acquired properties will continue to focus on providing superior, distinctive casino entertainment to their customers," Loveman said. "Once integration is complete, Horseshoe customers will be included in our Total Rewards player-loyalty program and Harrah's customers will be able to redeem rewards at Horseshoe casinos.
"Total Rewards and our nationwide geographic distribution were key factors in the 20 percent growth of cross-market play at our casinos last year," Loveman said. "We expect the addition of the high-quality Horseshoe properties and customer base to our portfolio to enhance that performance." –Bob Grossweiner and Jane Cohen