Harrah’s may sell Caesars Tahoe
Harrah’s Entertainment’s proposed $9.44 billion deal to buy its Las Vegas rival may result in the casino giant unloading Caesars Tahoe across the street at Stateline.
Details this early in the game since the announcement were scarce, but Harrah’s Chief Executive Officer Gary Loveman alluded to the possible outcome of market management in a conference call with investors.
When Loveman was asked how the company would handle multiple properties in the Tunica, Miss., and Tahoe markets, he said Harrah’s would “likely dispose of assets” there.
“Caesars Tahoe is a very small business, and that’s one we’re sure to consider,” he said.
The largest casino deal in the world requires federal and state regulatory approval to finalize – including that of the Federal Trade Commission. Regulators are expected within the year to evaluate monopolies in markets where Harrah’s 28 properties exist. Caesars Entertainment runs 27 properties.
“One of the things we – not only us but the federal government will look at – is how we define the market,” Nevada Gaming Control Board Chairman Dennis Neilander said.
“There’s a chance our market may include Reno, the North Shore, Carson City and even California tribal gaming areas.
“Sometimes the federal government will condition approval on a divestiture,” he said of any proposed asset sell-offs. “We’re all cutting new ground here.”
Much of Thursday morning’s discussion confirming the stock and cash agreement in principle was dominated by Harrah’s interest in having more Las Vegas exposure.
“Harrah’s has long said it wanted to take a much stronger position on the Strip,” said Skip Sayre, former Harrah’s/Harveys Lake Tahoe vice president of marketing. Sayre, who moved to the Las Vegas Hilton after logging eight years with Harrah’s, was “not surprised” by the announcement.
Like many casino insiders, he believes the timing of the $4.8 billion MGM-Mandalay merger was a factor in Harrah’s gaining a presence.
Harrah’s corporate spokesman David Strow said no details are available on how the company will finance the purchase, which includes absorbing $4 billion in debt from Caesars. Formerly Park Place Entertainment, the Las Vegas casino company’s stock purchase price in the deal turned out 27 percent higher at $16.96 per share.
Harrah’s Entertainment estimated it would save $80 million in cost reductions.
“There would be areas we’d have overlap,” Strow said.
He referred to corporate departments such as marketing.
However, Strow said it’s premature to announce which departments would consolidate and what extent of layoffs would occur, if any.
“I can tell you that customer service is a priority of Harrah’s. And, in order to have that, we need adequate staffing levels,” he said.
That was a concern of South Lake Tahoe Mayor Tom Davis.
“It’s a private enterprise. They can do what they want. My one concern is what the company will do with the employees. When Harrah’s bought Harveys, we saw the impact of what happened to a lot of longtime employees,” Davis said.
About 250 workers were laid off in waves at Harrah’s and Harveys after the July 2001 purchase. Departments such as transportation and marketing were consolidated.
Many of the workers live in the California town.
If a large number of layoffs occur in the consolidation, El Dorado County Supervisor Dave Solaro said it may hurt the Social Services department by draining resources.
“I hope our employees stay employed. I’m hopeful,” he said.
Although Harrah’s and Caesars Tahoe managers have not returned phone calls, the Tahoe civic and business communities are eyeing the possible outcome.
“This flies in the face of competition being a good thing, but it’s hard to be displeased at the fact that a giant in the industry is buying it,” Tahoe Douglas Chamber of Commerce Executive Director Kathy Farrell said.
– Susan Wood can be reached at (530) 542-8009 or via e-mail at email@example.com