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Gaming Guru

Rod Smith
 

Caesars Completes Sale of Hilton for $280 Million

22 June 2004

Another Las Vegas landmark changed hands Friday when Caesars Entertainment completed the $280 million sale of the Las Vegas Hilton to Colony Capital.

Caesars officials said they will use the proceeds of the sale to pay down more than $4 billion in debt, and that the sale will let the company focus resources on rebuilding the Caesars brand. After applying the proceeds of the sale, debt reduction since the beginning of 2002 will total more than $1.1 billion.

Joe Greff, gaming analyst at Fulcrum Global Partners, an independent Wall Street investment research firm, said Caesars will benefit from getting rid of a major noncore asset at a substantial multiple of its cash flow, a key measure of profitability.

"I think there are more it would like to sell, especially in the mid-South and non-Las Vegas properties in Nevada," he said.

Deutsche Bank analyst Marc Falcone said the sale of the Las Vegas Hilton, and possibly other properties, will help Caesars deploy capital in more productive ways that will increase earnings and returns for investors.

The announcement of the sale came a day after the Nevada Gaming Commission gave its regulatory OK of the transaction.

Caesars Entertainment spokesman Robert Stewart said the sale represents a great opportunity both for Caesars and Colony Capital.

"It helps us continue the strategy of paying down debt and focusing exclusively on the flagship operations on the Las Vegas Strip -- Caesars Palace, but also the Flamingo, Paris Las Vegas and Bally's," he said.

"But it's also great for Las Vegas because Colony Capital is committed to investing in the property, and we're sure it'll have a great impact not only for the Las Vegas Hilton, but for the Las Vegas market," Stewart said.

Colony Capital, which owns Resorts International in Atlantic City and is a partner in Accor Casinos in Europe, said it will immediately begin renovations and refocus the property on attracting convention business.

Colony Chairman Thomas Barrack called the Las Vegas Hilton "a one-of-a-kind asset" that his company plans to restore as "one of the great resorts of the world."

The 3,174-room hotel-casino was built by Kirk Kerkorian and opened in 1969 with 1,500 rooms. After running into financial difficulties, it was sold in 1971 to Hilton Hotels. Hilton later spun off its gaming properties to create what is now Caesars Entertainment.

Greff said the investments should help improve the competitive profile of the Las Vegas Hilton, especially since Colony's marketing program will concentrate on its location, adjacent to the Las Vegas Convention Center.

Falcone said Colony has proved itself to be an effective operator in Atlantic City and in Reno, where it briefly owned and operated Harvey's casinos.

He said the company has a great track record for energizing gaming properties and improving operations that suggests it will make the Hilton a good attraction for the city and tourism.

"The Las Vegas Hilton has a lot of unrealized value and it's a great opportunity for Colony," Falcone said.

Caesars Entertainment closed Friday at $11.19, up 12 cents, or 0.85 percent.