The private-equity buyout of Harrah’s Entertainment Inc. (HET) for $17.1 billion or $92 per share was approved by the New Jersey Gaming Control Board last week even though the principals revealed that the acquisition will actually involve $31 billion.
During the course of discussing the characteristics of the deal, Eric Press, a partner in Apollo Management Group and Texas Pacific Group principal Kelvin Davis revealed that when the acquisition is finally consummated there will be $24 billion of debt involved, about double the $12 billion that had been announced initially.
The $31 billion figure includes debt transactions, while the amount of equity involved is about $17.1 billion, Kelvin explained.
Both, however, strongly stressed that the partners would take a hands-off approach to the management of the company. Nor do they plan to sell any of the properties or layoff any personnel following the takeover.
"We invested in Harrah’s because we have a tremendous amount of confidence in Gary Loveman," said Press. Loveman, a former Harvard professor, has been chairman and CEO of the company since the retirement of Phil Satre.
"(Loveman’s) plans for the business are our plans. We don’t intend to change a thing. Harrah’s has pursued a strategy of growing its assets and investing in its assets. We see no reason why that would change in Atlantic City," he said.
As the world’s largest operating gaming company in the world, Harrah’s operates 50 casinos, either owned or under management, including 38 in the United States.
The four Atlantic City casinos — the Showboat, Harrah’s Atlantic City, Caesars Atlantic City and Bally’s Atlantic City — account for nearly one-third of the company’s cash flow. Exceeding that are the company’s six casinos on the Las Vegas Strip.
The New Jersey regulators’ approval is the first of 10 the company will seek in jurisdictions where they have gaming properties. Mississippi regulators on Thursday added their approval to the buyout joining the regulators in Louisiana. Still to be heard from is the board in Iowa who heard the buyout presentation more than a week ago but still hasn’t acted. Nevada regulators are scheduled to take up the matter in December.
Underscoring that the purchasing partners are in for the long haul, Davis said that he and Press "view this as an unusually good opportunity to invest and hold for a very long period. Public markets (meaning Wall Street investors) wanted to know what Gary Loveman was going to do for them three months from now. We are a much more patient and long-term investor."