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Gaming Guru

Howard Stutz
 

Harrah's passes on Singapore bidding

10 October 2006

SINGAPORE -- Harrah's Entertainment officially ended its 20-month-long quest to build a casino in the city-state of Singapore, announcing Friday that it would not submit a bid proposal for a site at Sentosa Island.

The Las Vegas-based casino operator said the decision, made jointly with its Singapore-based partner, Keppel Land, does not mean the company has given up on expanding into Asia.

In a brief statement, the companies said they had "determined it would not be possible to deliver a development on the scale we envisioned for Sentosa Island while meeting our objectives for this project."

Harrah's made no mention of this week's massive buyout offer by two private equity groups, who proposed to pay more than $15 billion for the company, as a reason for pulling out of the Singapore bidding.

On Tuesday, Harrah's spokesman Alberto Lopez said recent events caused the company to re-evaluate its Singapore proposal.

"The development team put together a spectacular package, but we just couldn't make the financials work," Lopez said.

Dennis Farrell, a gaming analyst with Wachovia High Yield Research, thought Harrah's would turn its interest in Asia toward Japan, which may become the next Asian market to allow for Las Vegas-style casinos.

"With Singapore, I think it was related to return on investment," Farrell said. "They just couldn't get the return they wanted. The company is in a good position, however, to take advantage of the potential investment opportunities in Japan. I think the market there may even be a little more favorable than Singapore.

The Singapore government last year said it would legalize casino gaming at two locations -- on Sentosa Island and in the Marina district -- as a way of boosting tourism and asked potential operators to offer an integrated resort proposal with lodging, gaming and other entertainment options.

Last spring, Singapore awarded the right to build on the first site in the Marina district to Las Vegas Sands Corp., over bids from Harrah's-Keppel and MGM Mirage. Harrah's and Keppel had proposed a 1 million-square-foot "urban theme park" featuring movie-themed attractions created by Academy Award-winning film director James Cameron.

Reportedly, Harrah's and Keppel had scaled back their proposal for Sentosa Island.

Harrah's had been the only major American gaming operator still seeking a Singapore casino.

Bids are due on the Sentosa Island site Tuesday. Three groups are left in the bidding -- Malaysian casino operator Genting International, which has partnered with Universal Studios; a partnership between Kerzner International and Singapore-based CapitaLand; and a partnership between Starwood Hotels and Eighth Wonder, a privately held Las Vegas-based company led by casino designer Mark Advent.

Harrah's Chairman Gary Loveman has been open with analysts and investors over the past year about the company's desire to win one of the Singapore gaming proposals. The company announced plans to expand internationally this year, saying it had signed agreements to build casinos in Spain and Slovenia while announcing a deal in September to buy London Clubs International for $530 million.

The buyout offer from Texas Pacific Group and Apollo Management calls for the two private equity companies to purchase all outstanding shares of Harrah's for $81 a share. Harrah's, which operates 37 casinos in 13 states, has asked a special committee made up of nonmanagement members of Harrah's board of directors to evaluate the offer and make a recommendation on the proposal.

Shares of Harrah's closed at $76.41, up 16 cents, or 0.21 percent, Friday on the New York Stock Exchange. Slightly more than 3 million shares were traded.

Harrah's passes on Singapore bidding is republished from Online.CasinoCity.com.