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Penn National bids to buy World Series of Poker host, Harrah'sFri, Dec 1st, 2006 @ 12:00am A group led by Penn National and hedge fund D.E. Shaw is considering making a cash and stock offer for casino giant Harrah's Entertainment, according to CNBC who first reported the bid on Tuesday citing unnamed sources familiar with the matter. Detailed of the bid were not disclosed. Harrah's hosts the World Series of Poker (WSOP), since it purchased Binions Horseshoe in 2004. Harrah's is the world's largest casino owner and operator, with more than 40 casinos under the Harrah's, Caesars and Horseshoe brand names. Lehman Brothers and Wachovia Corp. are set to provide financing for the Penn-Shaw deal. They will have some equity in the company if a deal went forward, the unnamed source added. Although real estate and hotel companies have often been targeted by private equity, large gambling groups like Harrah's are a relatively new target for the buy-out industry. Penn National's bid comes after an agreement could not be reached between Harrah's and private equity firms Apollo Management and Texas Pacific Group, who two months ago offered to buy Harrah's for roughly $15 billion and have since raised their offer to about $15.5 billion (which is more than $25.5 billion, including debt). Penn National, which owns and operates horse-racing parks and casinos, has a market capitalization of $3.3 billion. That is quite small compared to Harrah's $14.2 billion market capitalization. But the structure of Penn's deal highlights how the availability of cheap debt permits smaller companies to pursue purchases of larger rivals. The acquisition makes strategic sense for Penn National. Harrah's has substantial assets in the Las Vegas Strip and Atlantic City markets, where Penn has none. Acquiring these assets would transform Penn from a regional player into a national giant. Harrah's would also provide an upgrade in every market in which Harrah's and Penn National compete, including: St. Louis; Kansas City; Tunica, Miss.; Gulfport/Biloxi, Miss.; and Chicagoland. Moreover, Penn's bid would be more favorable to Harrah's shareholders, because of extra licensing hurdles that the private equity firms would face, though Penn would still need to obtain regulatory approval from state gaming authorities in Las Vegas and Atlantic City, where it currently has no casinos. Harrah's reported to the Wall Street Journal on Tuesday that a committee of non-management directors is reviewing the original bid. At the time this article was written, shares of Penn National closed at $38.16, down 58 cents, or 1.5 percent. Shares of Harrah's closed at $78.46, up $1.91 or 2.5 percent. Read Related Articles:
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