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Best of Liz Benston

Gaming Guru

Liz Benston
 

Harrah's Acquisition of Caesars Advances with N.J. Approval

24 May 2005

Harrah's Entertainment Inc. expects to complete its acquisition of Caesars Entertainment Inc. on or about June 13 should the deal be approved by the Federal Trade Commission and Nevada regulators as expected, both companies said today.

New Jersey casino regulators unanimously approved the transaction late Monday, removing what some analysts believed to be the most significant barrier to the $9.4 billion deal.

In a statement today, Harrah's said the Nevada Gaming Control Board is expected to consider the transaction on June 7 and the Nevada Gaming Commission, the final approval body, will consider the deal on June 10. These dates are contingent upon the deal obtaining prior approval from the FTC, the company said.

At a hearing that lasted until late Monday evening, the New Jersey Casino Control Commission concluded that there was no evidence that the combined entity would exert undue market pressure on Atlantic City consumers and that the combined entity would face plenty of future competition.

Commissioners chose not to impose further restrictions recommended by the state's Division of Gaming Enforcement that would have prevented the combined company from expanding into certain areas of Atlantic City and entering into joint ventures. Market competition is greater than in 2001 when regulators imposed a similar restriction on a Caesars' predecessor, regulators said. The commission also lifted that market barrier Monday.

Linda Kassekert, chair of the New Jersey Casino Control Commission, cited the 2003 opening of the Borgata resort in addition to several hotel expansions, renovations and new attractions in various stages of development as evidence that recent consolidations haven't hurt customers.

"I am convinced that today's Atlantic City casino market is vigorously competitive and dynamic, despite the industry trend toward consolidation," Kassekert said at Monday's hearing. "Concentration levels and market shares simply do not capture the level of competition that Harrah's will still confront post-merger.

In a research note to investors today, Morgan Stanley stock analyst Celeste Mellet Brown said New Jersey approval is a key milestone for Harrah's because of the significant presence the company will have in Atlantic City.

"New Jersey was the only significant market to watch for approval of the merger," Brown said.

Harrah's owns two of Atlantic City's 12 casinos and would acquire two Caesars properties, Bally's and Caesars Atlantic City.

Six top Harrah's executives testified before regulators, including Chief Executive Gary Loveman and Chief Financial Officer Charles Atwood.

Regulators also heard testimony from an antitrust attorney hired by Harrah's in addition to an expert antitrust witness for New Jersey's Division of Gaming Enforcement.

Regulators didn't include casinos in Connecticut, Delaware and future casinos in Pennsylvania and New York in its assessment of market concentration.

Market share for Harrah's averages about 15 percent across service categories and would rise to about 38 percent post-merger -- the largest of any company to date, commissioners said. Regulators said the number doesn't represent "undue" market concentration under the law.

Harrah's Acquisition of Caesars Advances with N.J. Approval is republished from Online.CasinoCity.com.