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BY DEBRA GRUSZECKI
Times Staff Writer | Friday, September 12, 2003 | (No comments posted.)
HAMMOND -- Glitzy promotional materials from May 2001 touting Empress Casino's switch to Jack Binion's Horseshoe brand seems, in retrospect, like a harbinger of gambling nuances to come.
"Get your game together,'' a cigar-chomping woman advised in that invitation, to a "Million Dollar Evening" with Jack.
Binion apparently took his own advice, leveraging his $629 million purchase in 1999 of the Empress Casino riverboat properties in Hammond and Joliet, Ill., into a $1.45 billion deal announced Thursday.
That was the price Las Vegas-based Harrah's Entertainment Inc. paid for the properties that comprise Horseshoe Gaming Holding Corp. Horseshoe also operates casinos in Tunica, Miss., and Shreveport-Bossier City, La.
As part of the sale, assuming approval by state regulatory agencies, Harrah's will assume $533 million in public debt and pay $917 million in cash. The sale is expected to close in the first quarter of 2004.
Harrah's executives said Thursday the company intends to sell its Harrah's property in Shreveport to avoid overexposure in that market. The company also is in talks with the Las Vegas Horseshoe, owned by Binion's sister Becky Behnen, to buy that property as well.
Gary Loveman, Harrah's Entertainment president chief executive officer, said, "This is a big day for our company.'' Indeed, the sale has been billed as the largest riverboat casino industry transaction to date.
"We will continue to bear the Horseshoe name,'' Loveman said, and the company even may rebrand some existing Harrah's casinos with the Horseshoe name.
Binion will assist with the transition, lending Harrah's his expertise and his persona.
News of the deal, which will mean Horseshoe customers will qualify for Harrah's Total Rewards player-loyalty program at either casino, caused Harrah's publicly traded stock to rise. Harrah's shares, which closed at $39.87 Wednesday, up 21 cents that day, climbed to $40.95 by 4 p.m. Thursday.
Horseshoe has been a prime competitor in all markets in which Harrah's has a stake.
"I think this will create synergies at the two properties,'' said Mike Smith, of the Indiana Casino Gaming Association, and will give Harrah's a chance to leverage each property against another with a combined customer base.
"I've always admired Harrah's and believe this is a great fit for Harrah's and Horseshoe" because both companies emphasize the gambling experience in its casino venues, Binion said.
Troy Keeping, general manager of Majestic Star Casino of Gary, said he thinks the sale presents a great opportunity for Buffington Harbor casinos, which includes Majestic Star and the Trump Casino and Hotel.
"You'll have two casinos run by one company with basically similar philosophies,'' Keeping said. "Here, we have two casinos run by two different companies."
Competition heats up
Donald Trump, owner of Trump Casino, agreed this will have a positive impact.
"The more that's going on, the more activity there is. It has a peripheral effect,'' Trump said.
To play off that concept, Majestic Star and Trump casinos just kicked off a joint marketing campaign called, "Double the Luck, Double the Options."
Gamblers at Buffington Harbor can parlay their odds at either casino without having to drive to another gambling locale. "One day this summer we got together and said, 'We're competing against each other when we really should be competing against the others,' " Keeping said.
Traditionally, Majestic Star and Trump have collectively posted revenues totalling as much -- or less -- than either Harrah's East Chicago or Horseshoe Casino in Hammond.
A source said blockbuster offers began rolling in for Horseshoe when Binion took steps to refinance.
Harrah's officials predict $36 million in annual savings within two years of closing the transaction, as a result of consolidating management, hiring, purchasing and marketing systems.
Horseshoe enjoys a loyal player base and recognizable brand, particularly among high-end poker and table game players, Loveman said.
"We believe our proven ability to apply sophisticated operating capabilities and drive strong cross-market play will help enrich the Horseshoe brand and benefit customers of both companies."
Wall Street's reaction was guarded, despite the higher stock price.
One analyst called the sales offer strategic from Harrah's point of view, but Deutsche Bank analyst Marc Falcone put his rate on hold.
"I"m not recommending a stock buy based on the acquisition,'' Falcone said. "Financially, it's a good transaction for Harrah's: It's highly accretive. There are good synergisms, refinancing and tax benefits that should result from the transaction. My concern is, I'd like to see how strategically they can integrate both properties successfully into their portfolio."
Pressure elsewhere
Tom Swoik, of the Illinois Gaming Association, said it's premature to say what the sale will mean for Harrah's in Illinois.
Operations increased significantly at Players Casino significantly after its acquisition by Harrah's, Swoik said. At the same time, he said the sale may hamper Harrah's ability to bid on the 10th gaming license, citing northern Illinois casino market share rules.
Indiana Gaming Commission spokeswoman Jennifer Arnold said state law changed July 1 allowing one casino to hold two Indiana riverboat gaming licenses, on condition it met regulatory approval and paid a $2 million transfer fee. If Orange County voters approve a casino license in a special referendum, Arnold said she did not believe regulations would prevent Harrah's from applying as operator of that casino, too.
"I do believe state regulators would look at it closely, and ask if it wanted one casino to operate three separate ventures,'' she said.
As for the impact to Hammond's operating agreement with Horseshoe, Hammond City Council President Kathy Pucalik, D-at large, said she expects that document will remain unchanged. When Horseshoe bought Empress, the local revenue agreement stayed in place.
"Horseshoe has been a good member of the business community, and been involved in a lot of important issues,'' Pucalik said, "I hope Harrah's will be a good member of the city as well."
What will be more interesting is what they will do to our lakefront now, said Councilwoman Kathleen Kazmierczak, D- 5th, given Horseshoe's $50 million parking garage now under construction at The Hammond Marina and a lawsuit challenging a pre-construction land lease deal at The Hammond Marina.
"I'd like to know if any other deals have been cut," she said. "And, what are the new owners going to do with our lakefront?
Falcone, the analyst, wants to know how long Binion will stick with the Horseshoe brand.
"The length of time he stays visible will be integral to the success of this acquisition,'' he said. "To me, Jack Binion is Horseshoe gaming."
Debra Gruszecki can be reached at dgruszecki@nwitimes.com or (219) 933-4158.
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