Harrah’s to buy UK casinos

Sep 5, 2006 8:18 AM

As originally reported by GamingToday last month, Harrah’s Entertainment confirmed last week that it wants to establish "a significant presence" in the rapidly-evolving gaming industry in the United Kingdom.

Toward that end, Harrah’s has tendered an offer to purchase London Clubs International for about $530 million.

London Clubs owns four casinos in London and also has sites in the seaside resorts of Southend and Brighton. The company — one of Britain’s largest gaming operators — has licenses to develop five more casinos.

London Clubs also operates two casinos in Egypt, one in South Africa and has a consulting relationship with a casino in Lebanon.

The board of directors of London Clubs International has unanimously recommended that its shareholders accept the offer. If the offer is successful, Harrah’s expects the transaction to close by the end of the year.

"London Clubs has a strong collection of properties that are well positioned in the United Kingdom’s evolving regulatory framework," said Gary Loveman, chairman and chief executive officer of Harrah’s. "Under Harrah’s ownership, these international properties will even be stronger in the future."

Harrah’s foray into the United Kingdom comes as Britain deregulates its gaming industry and transforms casinos from small, members-only clubs into large, Las Vegas-style gambling/entertainment complexes.

Loveman said that expanding into Britain is part of the company’s plan of establishing casinos in the international marketplace.

"The multi-national operational experience of LCI’s management strengthens Harrah’s existing team, allowing for continued international expansion," Loveman said.

Last November, Harrah’s announced it had agreed on a $700 million joint venture to build a casino on Slovenia’s border with Italy.

The same month it also agreed on another joint venture to build a $670 million casino in Spain, modeled after Caesars Palace in Las Vegas.

Harrah’s is expected to retain London Clubs’ managers to oversee its European holdings.

"Harrah’s has a lot of operations coming up in Europe in the next few years, and we understand Europe," said Bill Timmins, London Clubs chief executive. "We’ve been in France, and we understand Spain."

In connection with the transaction, Banc of America Securities LLC is acting as sole financial advisor to Harrah’s Entertainment.

Some Wall Street analysts said the purchase price might be high, but that Harrah’s would have medium- and long-range intangible benefits.

"This ”¦ may take some time before it bears fruit," said Steven Kent of Goldman Sachs. "Although the acquisition is rather expensive, in the short term it strengthens its international portfolio, in the medium term it better positions Harrah’s to win one or more of the 17 casinos licenses that will be issued as a result of deregulation, and long term Harrah’s would become a major beneficiary of further deregulation that is expected to occur over the next 3- to 5-years."

Harrah’s purchase of London Clubs comes in the wake of merger talks between London Clubs and Stanley Leisure, which is the largest casino operator in the United Kingdom with 45 sites.

But following the announcement in June of the merger talks, Harrah’s approached London Clubs with its own takeover bid.

A spokesman for Stanley Leisure last week said merger discussions with London Clubs had been terminated.