Apollo gamble on Harrah’s marked down

A listed-investment vehicle of private equity firm Apollo Global Management has marked down by 25% its co-investment in casino company Harrah’s Entertainment. Harrah’s was acquired by Apollo Global Management and TPG for a total $17.1bn earlier this year.

Listed investment vehicle Apollo Alternative Assets has marked down by 25 percent its co-investment in casino operator Harrah’s Entertainment.

Apollo Alternative Assets invests in and co-invests with Apollo Global Management’s private equity and capital markets investment funds.

The investment in Harrah’s was valued at $179.5 million on 31 March this year and was marked down to $134.3 million (€91 million) just three months later. Fair value as a percentage of net assets also dropped to 6.8 percent from 8.8 percent.

In the three months to the end of June 2008, Harrah’s reported revenues of $2 billion, a 3.7 percent decrease from the same period in 2007. Adjusted EBITDA dropped 20.6 percent year over the year from $534.2 million to $424.2 million.

Apollo and TPG agreed to acquire Harrah’s for $17.1 billion, or $90 per share, in January 2007. The transaction closed in January this year.

The deal included $3 billion of equity including $1.3 billion from Apollo. With the assumption of approximately $10.7 billion in debt, the total transaction price was around $27.8 billion.

The deal was agreed after months of negotiations and competing bids following the two private equity firm’s initial offer of $81 a share in October 2006.

Apollo and TPG bested a rival consortium including Penn National Gaming, a racetrack and casino operator, and hedge fund DE Shaw, one of the largest owners of Harrah’s stock and a vocal opponent of the initial $81-per-share offer. Penn National and DE Shaw reportedly made a bid of $87 per share.