Stock-holders looking for Harrah's buyout

Harrah's Entertainment stock-holders approved the buyout of the extensive gaming giant by a joint-venture partnership between two private equity firms. Stock-holders, who control 66 percent of the total outstanding shares voted in favor of the buy out, based on a preliminary count of the shares voted. The deal required a simple majority for approval.

Harrah's board agreed to a $17.1 billion buyout offer, or $90 per share, by Hamlet Holdings, a joint venture company controlled by subsidiaries of Apollo Management and Texas Pacific Group.The deal would be the biggest private equity buyout of a publicly held gaming company and the seventh-largest powerful buyout in history if it gains regulatory approval. The largest ever was RJR Nabisco Inc.'s $25 billion acquisition by Kohlberg Kravis Roberts & Co., completed in 1989.

The morning meeting was attended by fewer than 100 stockholders, with fewer than 50 categorized as individual holders. Stockholders who did not attend the meeting were able to vote online or by mail. Harrah's Chief Executive Gary Loveman and company legal counsel Michael Cohen conducted the closed-door meeting lasting less than 10 minutes. Described as "businesslike" and "very genial" by Harrah's spokesman Alberto Lopez, the meeting was held at Caesars Palace in one of the Roman Ballroom salons.

Josh Lerner, professor of investment banking at the Harvard University Business School, said it is too early to tell how the new ownership will approach management structure or corporate issues such as capital investment and unions. He added there have been instances where private equity groups have worked closely with unions but others where the relationship has been more hostile.

Casino companies have become takeover targets as investors are attracted to their real estate and ability to generate cash. Other recent buyouts include deals for Station Casinos and Aztar Corp. The buyers would assume an additional $10.7 billion in debt when the deal closes. It will nearly double to $21 billion, and its priority will shift to paying it down instead of reinvesting in growth, according to documents filed with the Securities and Exchange Commission.

Another company, Texas Pacific Group is a partner with private equity firm Kohlberg Kravis Roberts on the proposed $32 billion buyout of the Texas electrical utility TXU. The firm also proposed a $4.5 billion bid for Spanish airline Iberia.

Apollo Management is in the final phase of a $9 billion buyout of real estate company Realogy, parent company of Century 21, ERA, Coldwell Banker and Sothebys International. The deal still must gain approval from gambling regulators in more than a dozen states and several tribal nations where the company holds gaming interests.

The Harrah’s buyout gained approval of the European Union after receiving no complaints from rivals and not finding any antitrust issues. The world's largest gaming company by revenue, Harrah's owns or operates 48 casinos worldwide including 13 in Nevada. The company employed about 85,000 people in 2005. In Las Vegas the company owns Caesars Palace, Paris, Bally's, Rio, Bill's, Flamingo, Imperial Palace and Harrah's and an estimated 350 acres of real estate.