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Rod Smith

Sale of Horseshoe May Cost Downtown

14 January 2004

LAS VEGAS -- The sale of Binion's Horseshoe could prove pivotal to positioning Harrah's Entertainment as the biggest operator in gaming but end up costing downtown Las Vegas a world famous brand and the hallmark World Series of Poker.

Three days after federal marshals forced the Horseshoe's closure by seizing about $1 million from the casino's cashier's cage to cover about $2 million in unpaid union health and pension payments, Harrah's on Monday announced a deal to buy the hotel-casino from owner Becky Binion Behnen for an estimated $50 million, most of it in the form of assumed liabilities held by the landmark downtown property.

Sources close to the deal said Harrah's jumped at the opportunity to control the brand name in Nevada. It already was moving to control the Horseshoe brand nationally with the announced agreement in September to buy out Horseshoe Gaming Holding Corp. for $1.45 billion.

Deutsche Bank analyst Marc Falcone, however, said the importance of Monday's tentative agreement is not in reopening the Horseshoe, but in taking the last step in controlling the brand.

Analysts speculated that Harrah's has no interest in downtown Las Vegas or in operating the Horseshoe in the long run.

Instead, Falcone expects Harrah's to announce plans this year to develop a full-scale, Las Vegas resort under the Horseshoe brand, probably to be called Harrah's Horseshoe, at either the New Frontier site or the Imperial Palace site on the Strip.

Imperial Palace spokeswoman Jackie Brett, however, said the property would not be for sale. Phil Ruffin, owner of the New Frontier, did not return phone calls seeking comment Tuesday.

Other Wall Street analysts who asked not be be named agreed with Falcone, and added that controlling the World Series of Poker is central to Harrah's plans to extend its dominant position in the industry.

"Gary Loveman believes it's an activity they can grow and use to reinforce their image as the place to gamble. They look at it as a brand and an activity they can roll out to other sites and solidify their position in the world of gaming," one analyst said.

When the deal closes, Harrah's will pick up the brand name, the World Series of Poker and the Horseshoe's downtown casino-hotel, Harrah's spokesman Gary Thompson said Tuesday.

"We will take a look at all of these (assets). We've been very forthcoming that we like the brand and we definitely want the World Series of Poker. It's the largest event in the world of gaming, draws customers from all over the world, generates tremendous publicity and we will keep operating it," he said.

Because the World Series of Poker is identified with Binion's Horseshoe, analysts suggested Harrah's will reopen the downtown property as quickly as possible and continue using it as the venue for the poker tournament until a suitable alternative has been developed.

Analysts suggested Harrah's will want to partner with a manager or another company with downtown experience to operate Binion's Horseshoe in the short run, but will probably sell the property -- with Boyd Gaming Corp. viewed as the most likely buyer -- as soon as it can move the World Series of Poker.

Boyd Gaming spokesman Rob Stillwell said his company has not been involved in any discussions with Harrah's about operating the Horseshoe.

However, Stillwell welcomed the purchase announcement and said, "When you add this kind of new energy, it brings excitement. We suspect this (purchase) will be a big positive."

When asked about possible discussions on buying the downtown property after an interim period, however, he said, "It is too early to tell."

Bill Thompson, University of Nevada, Las Vegas professor and casino industry expert, believes the sale would be bad news for downtown Las Vegas because of the power of the Binion's Horseshoe name.

"Without the name, the place is worthless. It's another Sally's Slot Palace," he said.

Otherwise, Thompson said the pending deal would be very good news for downtown.

"Downtown desperately needs a third draw. The (Golden) Nugget does it, and Boyd (Gaming Corp.) draws (visitors) with the California and its Hawaii niche and with Main Street Station. But it needs another draw like the Horseshoe was 10 years ago. It means a lot more than just 1,000 jobs," he said.

Thompson also said the property could be put to creative use, such as turning it into a world-class gaming museum that also operates as a casino-hotel.

Although Harrah's offered few details about its plans Tuesday, Harrah's Thompson said company officials and Behnen spent Tuesday trying to solidify the definitive purchase agreement and wrapping up discussions with the Nevada Gaming Control Board about transferring control and reopening the Horseshoe as quickly as possible.

The major issue for Harrah's with the regulators involves whether to apply for emergency permission to operate under the Horseshoe license or to apply for a new license, said Control Board Chairman Dennis Neilander.

However, Neilander said the board will expedite the application, whichever procedure Harrah's elects to pursue.

Harrah's spokesman, however, said it was too early to discuss when the casino-hotel would reopen, how the deal would be financed or how many of the Horseshoe's estimated 900 employees would be retained.

Culinary Local 226 held an informational meeting with the hotel-casino's 450 union employees Tuesday to explain the situation, and Secretary-Treasurer D. Taylor said the union continues to treat the situation as an emergency because being out of work hits some employees very hard.

Sale of Horseshoe May Cost Downtown is republished from