Harrah’s buys Harveys
Harrah’s Entertainment agreed to buy Harveys Casino Resorts for $675 million in cash and liabilities to expand in the Iowa and Colorado markets, the Las Vegas-based firm announced Tuesday.
As part of the agreement, Harrah’s will take over Harveys Resort & Casino in Lake Tahoe, a market in which Harrah’s Entertainment Chairman and Chief Executive Officer Phil Satre told investors in a conference call the company plans to “strengthen relationships with customers.”
The buyout also involves Harveys Casino Hotel and the Bluffs Run Casino, both in Council Bluffs, Iowa. This market, with 1.7 million potential customers, generated $350 million of gaming revenue last year.
It also includes Harveys Wagon Wheel Hotel/Casino in Central City, Colo. The deal doesn’t include the Resorts Casino Hotel in Atlantic City, New Jersey.
The merger brings the Harrah’s properties to 25 in 12 states.
“Harveys represents a big opportunity not only in Lake Tahoe, but in Iowa, where they own two properties,” said Carlos Tolosa, Harrah’s western division president. “It gives us a competitive position for the future.”
At this point, Harrah’s company management is uncertain what name Harveys will operate on. At the state line, the two properties flank U.S. Highway 50.
Tolosa characterized Harveys as an “admirable competitor” for years.
With the purchase, Harrah’s will bring gamblers in the Iowa and Colorado markets into its Total Rewards customer loyalty program, which rewards play at Harrah’s casinos in all its markets.
The merger will bring the Harrah’s database to more than 20 million players.
Harrah’s plans to refinance Harveys existing debt, which amounted to $367 million as of Feb. 28. Earlier this year, Harrah’s refinanced a portion of its own existing debt.
The acquisition is subject to regulatory approvals. The transaction is expected to close by the fourth quarter.
Harrah’s shares rose $1.45 to $36.76 Tuesday. The purchase was announced after the close of trading.
The casino company plans to invest in capital improvements, while cutting back in other areas.
Harrah’s will set up “due-diligence teams” to determine consolidation possibilities and identify repetitive functions.
“There will be redundancy. We don’t need to be having two buyers. We’ll have one buyer buying for everybody,” Tolosa said, adding it’s too soon to tell exactly what the staffing picture will look like.
Regardless, Tolosa said he recognizes a shortage of employees exists in Lake Tahoe.
The buy has no effect on Bill’s Casino, Harrah’s other property across the street, Tolosa indicated.
As with many factors, an uncertainty exists in the outcome of Project 3, a redevelopment plan that includes a convention center at Stateline.
“We have not seen the plans for that yet. We’ll evaluate the proposal as it becomes available,” said Gary Thompson, spokesman for Harrah’s entertainment in Las Vegas.
“Redevelopment seems to be in everybody’s interest, and we’ve always been supportive of that,” Harrah’s Lake Tahoe spokesman John Packer said, agreeing with Thompson that this type of venture will be evaluated.
“It seems to offer great potential,” Packer said.
“The consolidation of the Harrah’s and Harveys operations in Lake Tahoe will allow us to improve performance and reduce operating costs by combining many aspects of what are today two separate facilities,” Satre stated.
There was talk of the two companies’ synergies Tuesday.
“We are proud of our success at Harveys,” said Thomas Barrack, Jr., chairman and chief executive officer of Colony Capital and acting CEO and president of Harveys.
Harveys Lake Tahoe Senior Vice President of Corporation Marketing Jim Rafferty was unavailable for comment.
Harveys’ Los Angeles-based parent bought Harveys for more than $400 million in 1998. Last January, Harveys ended a planned $1.28 billion purchase of rival Pinnacle Entertainment Inc., after it had trouble raising funds for the acquisition.
Colony is finalizing a separate buy today of Resorts International Casino from Sun International Hotels Limited, Paradise Island, The Bahamas.
“We typically hold assets from three to five years,” said Jonathan Grunzweig, a principal at Colony.
“In a way, it kind of seems sad it’s the end of an era,” South Lake Tahoe Councilwoman Judy Brown said of Harveys. “They’ve contributed a lot to this city.”
Tolosa said Harrah’s will somehow consider integrating Harvey Gross’ legacy into the new company.
A resident since 1972, Brown recalled how her mother was selected as a “shill,” a paid player for Harveys.
Brown predicted the merger would be good for the city – referring to the prospect of Harrah’s investments.
“(This deal) puts the marketplace into the hands of those who understand it,” Lake Tahoe Gaming Alliance Executive Director Steve Teshara said. “Harrah’s is strongly committed to this market,” he added, noting the firm’s “great sense of community.”
“The acquisition is significant. I know details need to be worked out, but they’re the best company to handle this kind of venture,” he said.
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