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Gaming Guru

Rod Smith
 

Harrah's Prepares for Merger

29 April 2005

LAS VEGAS -- Harrah's Entertainment is on track to complete its $9.4 billion merger with Caesars Entertainment in the next two months and is finishing plans for the four landmark Strip properties it will add in the deal, Chairman Gary Loveman told shareholders Thursday.

"We're poised to merge Caesars Entertainment into Harrah's and double the size of our company," he said at the company's annual meeting at the Rio. Advertisement

Besides sheer size, however, Loveman said the key to the merger will be the addition of four major resorts on the Strip.

He conceded that Harrah's, which since 1997 has pushed growth through its customer loyalty program, is coming home for added concentration on Las Vegas with its acquisition of Caesars Entertainment.

He said Harrah's recently has had insufficient Las Vegas inventory to meet demand from even its established customers.

Harrah's operates only two properties in Las Vegas, the Rio on Flamingo west of Interstate 15 and Harrah's Las Vegas on the Strip, which together have about 5,000 rooms.

With the merger, Harrah's picks up Caesars Palace, Paris Las Vegas, Bally's and the Flamingo, more than tripling the number of rooms it operates in Las Vegas to 18,000.

"One of the most exciting opportunities coming from the Caesars deal is our increased presence in Las Vegas, where profits have been soaring," Loveman said.

Loveman said Harrah's Western Division President Tom Jenkin and the integration team have been working for seven months to develop and implement a "six-stop program" to bring Harrah's loyalty program customers to all the properties it will have in Las Vegas.

Harrah's is not fundamentally reinventing its company, Loveman said, stressing the importance of customer service and employee development.

However, he added that although Harrah's has been slow to integrate its programs with Horseshoe Gaming, which it took over last year, it will move much more quickly to deliver its customer rewards programs to Caesars Entertainment patrons because surveys show that is what they want.

Loveman said Harrah's has proceeded cautiously with Horseshoe customers because they were comfortable with established operations and he wanted to avoid spooking them.

The integration team has studied every aspect of Harrah's and Caesars to combine the best of each, he said.

"They have examined possibilities for cost savings and revenue growth, explored ways to put our sophisticated and proprietary management and analytic tools to work at Caesars properties, and determined the best practices of each company that could be used to the benefit of both companies," he said.

Two huge advantages Harrah's derives from the merger is a large work force already committed to customer service and $1.75 billion in recently completed capital projects, including the addition of a new tower at Caesars Palace in Las Vegas, he said.

He said the new tower and related improvements have helped restore Caesars Palace's status as the epitome of luxury for the industry.

"Those investments will certainly make accomplishing our goal of significant organic growth in the Caesars portfolio that much easier. And the opportunities for cross-market play will be enhanced tremendously," Loveman said.

He said Harrah's should also enjoy a lift from Caesars Entertainment's plans to develop a casino in Sullivan County, N.Y., in partnership with the St. Regis Mohawk tribe and its proposed expansion in Singapore.

Harrah's spokesman David Strow said the company expects to close on the $9.4 billion buyout by the end of the first half of 2005 and possibly by early June.

Loveman said the company is awaiting final word from the Federal Trade Commission and is set to appear before Nevada regulators in late May or early June for final approval.

When the deal closes, Harrah's will be the first gaming company to join the Fortune 200 list of big companies and will pass MGM Mirage as the largest gaming company worldwide with annual revenues of more than $9 billion. However, MGM Mirage will remain the dominant gaming company in Las Vegas and in Nevada.

MGM Mirage, which completed its buyout of Mandalay Resort Group on Monday, has annual revenues of $7.3 billion.

Harrah's will continue to have the gaming industry's only investment-grade credit rating, which will give it access to wider capital markets on more favorable terms that its competitors.

Harrah's shares fell $1.27, or 1.97 percent, Thursday to close at $64.94 on the New York Stock Exchange. Trading volume for Harrah's was normal at 1.5 million shares.

Caesars Entertainment ,shares fell 31 cents, or 1.54 percent, Thursday to close at $19.83, also on the New York Stock Exchange.

Harrah's Prepares for Merger is republished from Online.CasinoCity.com.