Private equity firms including Apollo Management and Texas Pacific Group have made a $15.1 billion (€11.8 billion) buyout offer for Harrah’s Entertainment, the company confirmed today in a statement. While not yet certain, a buyout of the Las Vegas-based casino operator, the world’s biggest, would be among the largest of the year.
Apollo and Texas Pacific offered $81 per share for the company. Harrah’s has formed a special committee and has hired UBS Securities as its financial adviser and Kaye Scholer as it legal adviser, but the casino giant’s board “has not determined that the transaction is in the best interest of Harrah’s and its stockholders,” according to the statement.
Harrah’s operates casinos under the Harrah’s and Caesar’s flags in both Las Vegas and Atlantic City, and has its eye on international expansion. It recently lost a bid for one of the gaming licenses to operate a casino in Singapore.
Apollo and Texas Pacific are among several private equity firms attracted to the rapidly expanding gaming business for its strong cash flow. The industry’s annual revenue has skyrocketed as regulatory laws have been relaxed and casinos have sprouted up on Native American reservations across the US. The same looks set to happen as regulations governing gambling roll back internationally, with Singapore issuing gaming licenses, the UK easing restrictions in its once tightly controlled market and Macau, located off the coast of southeast China near Hong Kong, growing into an Asian gambling hotspot.
Tom Barrack’s Colony Capital has also taken advantage of industry consolidation in the gaming sector, picking up casino properties as gaming firms merge. In March, Colony joined with Goldman Sachs’ Whitehall Funds, Providence Equity Partners and The Related Companies to acquire Kerzner International for $3.6 billion, giving the consortium control of the Mohegan Sun casino in Connecticut and the Carribean’s largest gaming operation at the Atlantis Resort on the Bahamas’ Paradise Island.
Last week, Oaktree Capital Management won clearance from Nevada regulators for its acquisition of a one-third stake in Cannery Resorts, which operates two Las Vegas casinos and is pursuing expansion opportunities in Pennsylvania, where regulators recently issued the state’s first licenses to operate some slot machines at racetracks. Harrah’s bid for one of the licenses was successful.
Any successful bid for Harrah’s will have to overcome the difficulties of acquiring a gaming license—a process Barrack once likened to “the Battaan Death March” in sister publication Private Equity International. Unlike Colony, neither Apollo nor Texas Pacific has invested in the casino business, inciting speculation that Colony may be called in on any winning bid.