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Colony Capital in Talks to Acquire 4 Casinos

Harrah's and Caesars give the L.A. investment firm exclusive bidding rights, sources say. A deal could top $1 billion.

August 31, 2004|Julie Tamaki | Times Staff Writer

Los Angeles investment firm Colony Capital is in negotiations to buy the Atlantic City Hilton and three other casinos owned by Harrah's Entertainment Inc. and Caesars Entertainment Inc. for more than $1 billion, according to people close to the deal.

An Aug. 27 letter signed by the two gambling companies essentially gives Colony Capital, which owns the Las Vegas Hilton, the exclusive right to bid for the four casinos. Colony Capital has less than a month to make an offer, according to sources, with two other interested bidders waiting in the wings.

News of the possible sale comes just three days after U.S. antitrust regulators signaled that Harrah's proposed $5.2-billion acquisition of Caesars would come under additional scrutiny.

Shedding casinos that could raise antitrust issues might be a way of obtaining regulatory approval of the acquisition.

The casinos for sale include Caesars' Atlantic Hilton in New Jersey and Bally's casino near Tunica, Miss., in addition to Harrah's-owned properties in the Tunica and East Chicago, Ind., areas.

All three locations pose possible antitrust issues.

In Indiana, where a casino company can hold a maximum of two licenses, Harrah's and Caesars together own three casinos, according to a person close to the deal. Mississippi's Tunica County is also an area of concern because the two companies together own five of about a dozen gambling properties.

The letter giving Colony Capital the exclusive right to present a bid was addressed to Nick Ribis, a partner in the proposed deal and general partner of Resorts International Holdings. The letter indicates the price of any deal would be 8.5 times the casinos' 2004 earnings before interest, taxes, depreciation and amortization -- giving such a transaction a value of more than $1 billion.

Spokesmen for Colony Capital, Harrah's and Caesars declined to discuss the deal Monday.

"We don't comment on rumors about potential acquisitions or dispositions," said Robert Stewart, a spokesman for Caesars.

Colony Capital was formed in 1991 by Thomas Barrack, a former principal in investment firm Robert M. Bass Group. He also served as deputy undersecretary of the Interior Department in the Reagan administration. As of 2003, privately held Colony had invested $9 billion in thousands of properties including Resorts International casino in Atlantic City, N.J.

Shares of Caesars fell 15 cents to $14.92 on the New York Stock Exchange. Harrah's shares dropped 50 cents to $47.28 on the NYSE.

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