Boyd Gaming Agrees to Purchase Riverboat Casino from Harrah's

Las Vegas-based Boyd Gaming on Tuesday evening announced a $190 million deal to buy Harrah's Shreveport riverboat in northwestern Louisiana, a deal company executives believe adds a solid cash-producing casino at an attractive price.

The deal is also a plus for Harrah's Entertainment, that company's executives said, because it eases concerns about Harrah's market concentration in the Shreveport area pending its $1.45 billion deal to buy Jack Binion's three-riverboat casino company.

The deal continues Boyd's recent history of buying solid cash-flow producing properties for a good price, and Boyd Gaming Chairman Bill Boyd said in a statement Tuesday night he was pleased with the purchase.

"We are very excited about adding the Shreveport operation to our family of properties, and what will be our third in Louisiana," Boyd said. "We are very familiar with the area and look forward to getting to know the surrounding communities on a more personal level."

Harrah's Shreveport has a 514-room hotel with more than 23,000 square feet of casino space and 1,224 slot machines, 32 table games and four restaurants.

The property generated about $44 million in operating cash flow this year.

According to Bear, Stearns & Co., 36 gaming company acquisitions between 1995 and 2002 cost the buyers an average multiple of 8.7 times cash flow.

The Harrah's Shreveport purchase would cost Boyd about 4.3 times the property's annual cash flow, almost a 50 percent discount from the average.

Boyd's recent acquisitions include its purchase of the:

. Delta Downs racino in southwestern Louisiana for $130 million in May 2001.

. Blue Chip riverboat in Michigan City, Ind., for $273.5 million in November 1999, at a 4.2x cash flow multiple.

. Treasure Chest riverboat in suburban New Orleans, for $110 million for the 85 percent stake in the boat that Boyd didn't already own, in October 1997.

. Par-a-Dice riverboat in East Peoria, Ill., for 175 million in December 1996, at a 5x cash flow multiple.

"Boyd has been a great acquirer of assets at discounted multiples," Deutsche Banc casino industry analyst Marc Falcone said Tuesday evening. "Our concern with the purchase is the market Boyd's buying into, as Bossier City-Shreveport is incredibly competitive."

Boyd executives said they've yet to decide which name to place on the casino, but Falcone predicted they'd use the Sam's Town brand that's already on properties in Las Vegas and Tunica, Miss.

For Harrah's, the sale is critical to closing its acquisition of Horseshoe Gaming Holdings, Falcone said, both to alleviate Louisiana regulators' potential concerns about Harrah's market dominance and to reduce its own share of the very competitive Shreveport market.

Harrah's opened the Shreveport riverboat in April 1994, and also owns the nearby Louisiana Downs racino.

With its planned purchase of Horseshoe Gaming Holdings, including its Bossier City riverboat, across the Red River from Shreveport, Harrah's would have three northwest Louisiana casinos. But, to avoid overexposure in the market, Harrah's had already announced its intent to sell Harrah's Shreveport.

"We are extremely pleased that Boyd Gaming, which has a richly deserved reputation for superior treatment of its employees and guests, is taking over an operation that has been a part of the Harrah's family since 1994," Harrah's CEO Gary Loveman said in a statement. "In addition to being one of the industry's top operators, Boyd Gaming believes strongly in good corporate citizenship wherever it operates."

The deal was announced more than six hours after Tuesday's market close. Harrah's shares closed at $52.13, down 24 cents or 0.5 percent, while Boyd's shares closed at $16.92, up 17 cents or 1 percent.