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Arnold M. Knightly

Stockholders like Harrah's buyout

10 April 2007

LAS VEGAS, Nevada -- Harrah's Entertainment stockholders on Thursday approved the leveraged buyout of the sprawling gaming giant by a joint-venture partnership between two private equity firms.

Stockholders who control 66 percent of the total outstanding shares voted in favor of the buyout, based on a preliminary tally of the shares voted. The deal required a simple majority for approval.

Harrah's board agreed in December to a $17.1 billion buyout offer, or $90 per share, by Hamlet Holdings, a joint venture company controlled by subsidiaries of Apollo Management and Texas Pacific Group.

The deal would be the biggest private equity buyout of a publicly held gaming company and the seventh-largest leveraged buyout in history if it gains regulatory approval. The largest ever was RJR Nabisco Inc.'s $25 billion acquisition by Kohlberg Kravis Roberts & Co., completed in 1989.

"Ninety dollars is a good price," said Daniel Buhr, a stockholder from Waterloo, Iowa.

Harrah's shares rose 14 cents Thursday to close at $84.90 on the New York Stock Exchange.

The stock closed at $82.18 per share on Dec. 18, a day before the $90 per share offer was announced. Harrah's had received an $83.50 per share offer in October from the two firms.

"It went according to plan, cut and dried," Las Vegan Lou Goldstein said. "The decision was made by principal shareholders."

Officials at Harrah's and Texas Pacific Group declined to comment on the vote. Apollo Management spokesman Steven Anreder said the company was "pleased."

The morning meeting was attended by fewer than 100 stockholders, with fewer than 50 categorized as individual holders. Stockholders who did not attend the meeting were able to vote online or by mail.

Harrah's Chief Executive Gary Loveman and company legal counsel Michael Cohen conducted the closed-door meeting lasting less than 10 minutes.

Described as "businesslike" and "very genial" by Harrah's spokesman Alberto Lopez, the meeting was held at Caesars Palace in one of the Roman Ballroom salons.

The meeting was open only to stockholders who owned shares before the close of business March 8, when the stock closed at $83.81.

The stock closed trading at $82.32 on Dec. 19, the day the $90 per share offer was announced.

Word of a possible deal first trickled out in early October.

Josh Lerner, professor of investment banking at the Harvard University Business School, said it is too early to tell how the new ownership will approach management structure or corporate issues such as capital investment and unions.

"I think it is hard to generalize and say one group has a particular strategy or style," Lerner said. "Especially given how complex the portfolio they have."

Lerner said there have been instances where private equity groups have worked closely with unions but others where the relationship has been more antagonistic.

Casino companies have become takeover targets as investors are attracted to their real estate and ability to generate cash. Other recent buyouts include deals for Station Casinos and Aztar Corp.

The buyers also would assume an additional $10.7 billion in debt when the deal closes. It will nearly double to $21 billion, and its priority will shift to paying it down instead of reinvesting in growth, according to documents filed with the Securities and Exchange Commission.

Texas Pacific Group also is a partner with private equity firm Kohlberg Kravis Roberts on the proposed $32 billion buyout of the Texas electrical utility TXU.

The firm also proposed a $4.5 billion bid for Spanish airline Iberia in late March.

Apollo Management is in the final stages of a $9 billion buyout of real estate company Realogy, parent company of Century 21, ERA, Coldwell Banker and Sothebys International.

The deal still must gain approval from gambling regulators in more than a dozen states and several tribal nations where the company holds gaming interests.

Gaming attorney Frank Schreck, who is representing Harrah's in the regulatory process, said in February that the proposal is not expected to go before Nevada gaming officials before October.

The buyout gained approval of the European Union on Wednesday after receiving no complaints from rivals and not finding any antitrust issues.

The world's largest gaming company by revenue, Harrah's owns or operates 48 casinos worldwide including 13 in Nevada. The company employed about 85,000 people in 2005, according to Hoovers.

In Las Vegas the company owns Caesars Palace, Paris, Bally's, Rio, Bill's, Flamingo, Imperial Palace and Harrah's and an estimated 350 acres of real estate.

The Associated Press and Bloomberg News contributed to this report.

Stockholders like Harrah's buyout is republished from