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Harrah’s, Caesars ink deal with Colony

Sep 28, 2004 11:18 AM

Harrah’s Entertainment and Caesars Entertainment on Monday signed a definitive agreement to sell Harrah’s East Chicago, Harrah’s Tunica, Atlantic City Hilton and Bally’s Tunica to an affiliate of Colony Capital.

The purchase agreement calls for Colony to pay a combined total of about $1.24 billion for the four properties. Under terms of the agreement and subject to regulatory approvals, Colony will purchase the assets of the four properties and assume certain related current liabilities.

Colony currently owns Resorts International in Atlantic City and recently purchased the Las Vegas Hilton. Colony also is a partner in Accor Casinos in Europe.

Harrah’s and Caesars agreed to sell the four properties in connection with the $9.4 billion merger agreement they announced last July, although the sale is not conditioned on closing of the merger.

State regulatory agencies and the Federal Trade Commission are reviewing the Harrah’s-Caesars merger, which the companies expect to be consummated by mid-2005.

"We are very proud of the successful businesses built by the employees of Harrah’s East Chicago and Harrah’s Tunica, and know their dedication and professionalism will serve Colony well," said Gary Loveman, Harrah’s Entertainment president and chief executive officer. "Customers will continue to be able to earn credits with their Total Rewards loyalty cards at these two Harrah’s properties until Colony assumes control of them."

Harrah’s plans to use the approximately $476 million in after-tax proceeds it expects to receive from the sale to reduce debt.

"This transaction will enable Caesars to accelerate our goal of reducing our indebtedness below $4 billion and our debt ratio to less than 3.75 times EBITDA," said Wallace R. Barr, Caesars Entertainment president and chief executive officer.

Caesars Entertainment expects to report a gain on the sale in the quarter in which the transaction closes.

"We are honored to be able to acquire these assets from two of the most prestigious gaming companies in the world," said Thomas J. Barrack, chairman and CEO of Colony Capital.