Flush with cash, two private investment companies are placing bets on the gambling business, anteing up nearly $15.1 billion in a bid to acquire the world's largest casino company, Harrah's Entertainment Inc.
Harrah's said Monday that it had received an offer from Apollo Management and Texas Pacific Group to purchase all the company's stock for $81 a share. The deal, if accepted, would be one of the largest buyouts in history.
The Las Vegas company insisted in a statement that there was "no assurance that Harrah's will enter into this or any other transaction." It acknowledged that its board of directors had assembled a committee to review the proposal and had hired UBS Securities as a financial advisor.
The news sent Harrah's shares leaping $9.25, or 14%, to $75.68. The bid represented a 22% premium over Friday's closing price but was short of the $83.33 price that the stock fetched in May.
The proposed deal would be the latest in a spree of colossal leveraged buyouts.
Some are laying odds that the bidding isn't done yet. Apollo Management, Texas Pacific Group and Harrah's didn't return calls seeking comment.
"It's probable that the deal will get done, and that it will get done at a higher price," said David Brown, an analyst for Minneapolis-based Sit Investment Associates, which owns about 200,000 shares of Harrah's stock. "By being private, Harrah's can reinvest in their business without having to worry about what Wall Street is thinking all the time."
Hungry for higher returns than they can get in stock and bond markets, institutional investors recently have pumped tens of billions of dollars into private equity firms, providing them with the capital to use in buyouts. Private equity investors hunt for companies that generate substantial cash flow or can be broken up and sold.
The bid for Harrah's marks the largest inroad yet into the ca- sino market by private equity players. They have been reluctant in part because of the complexity involved in acquiring and keeping gaming licenses.
"A large portion of the value in this company can be attributed to future growth opportunities. They have a lot of irons in the fire," said Jake Balzer, a senior analyst with Guzman & Co. "Certainly some of those opportunities are going to fall by the wayside if private equity were to buy them out."
