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MISSISSIPPI AND LOUISIANA -- Harrah's Entertainment and Pinnacle Entertainment agreed Monday to a swap of hurricane-damaged riverboat casino properties. Harrah's will acquire the Casino Magic in Biloxi, Miss.; Pinnacle picked up side-by-side floating casinos in Lake Charles, La.
The Las Vegas-based companies signed a nonbinding letter of intent. The transaction is subject to regulatory approvals.
Harrah's spokesman David Strow said the deal was not a straight swap of properties, but the companies declined to disclose financial specifics.
Harrah's had previously announced it hoped to exit Lake Charles after its two riverboat casinos were destroyed by Hurricane Rita on Sept. 24. In the deal, Pinnacle will also acquire the 263-room Lake Front Hotel, which Harrah's now operates.
"As we are focusing our Gulf Coast development efforts on Biloxi and New Orleans, we felt it made sense to sell Harrah's Lake Charles," said Anthony Sanfilippo, president of Harrah's Central Division.
Pinnacle operates L'Auberge du Lac in Lake Charles, which has dominated western-Louisiana gaming since it opened last May. The bulk of Lake Charles' out-of-state customers come from nearby Houston.
Pinnacle didn't comment on the deal, but analysts thought the company would use the acquired riverboats to expand gambling operations at L'Auberge and the company's casino in Bossier City, La.
Casino Magic in Biloxi was destroyed by Hurricane Katrina on Aug. 29. Pinnacle had been weighing its options with the property. The swap gives Harrah's a commanding presence in the rebuilding Mississippi Gulf Coast gaming market.
Harrah's announced recently it would reopen a portion of the Grand Casino Biloxi, which was also destroyed by Hurricane Katrina, this summer with a renovated 500- room hotel and 35,000-square-foot casino.
The company hopes to announce plans for a new destination in Biloxi by this summer.
The Grand Casino site is 27 acres and the Casino Magic site, directly to the east, is 18 acres.
"We believe in the long-term potential of the Mississippi Gulf Coast, and are looking forward to returning to this vibrant market," Sanfilippo said. "The site we are acquiring from Pinnacle will give us an even larger footprint in Biloxi, giving us greater flexibility in creating a compelling entertainment experience."
Shares of Harrah's jumped initially on the news, but finished the day at $79.51, down 4 cents or 0.05 percent. Pinnacle shares closed at $30.71, up $1.61 or 5.53 percent.
Bear Stearns gaming analyst Joe Greff said the deal was a good move for Harrah's.
"We are positive on the transaction as we believe the deal relinquishes Harrah's from a potentially expensive and difficult project in Lake Charles and increases exposure in Mississippi, a lower tax rate and in our opinion, more stable jurisdiction," Greff said in a note to investors.
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