Harrah's Entertainment Inc., the world's biggest casino operator, on Monday said it had received a $15 billion buyout offer from private equity firms Apollo Management and Texas Pacific Group.(TPG.UL), sending shares of the whole gaming sector up sharply.
The proposed deal valued at $81 cash per share, a 22 percent premium to the closing price of Harrah's stock on Friday would rank as one of the largest private equity buyouts ever.
Las Vegas-based Harrah's, which owns or manages more than 40 casinos, mainly under the Harrah's, Caesars and Horseshoe brands, gave no indication that it would accept the deal. It said it had formed a special committee of its non-management directors to review the proposal.
Harrah's shares rose 14.4 percent to $76 in late-morning trade on the New York Stock Exchange, leading gains across the gaming sector.
If this deal gets done, clearly it opens the way for (casinos) as a new home for private equity, said Smedes Rose, an analyst with Calyon Securities. There's a lot of money out there.
Shares of Harrah's rivals MGM Mirage and Boyd Gaming Corp. rose more than 3 percent, possibly boosted further by the U.S. Congress passing a bill on Saturday that would ban most forms of Internet gambling. The Dow Jones U.S. Gambling index rose 4.3 percent.
The offer for Harrah's comes just as the company puts the finishing touches on its plans to beef up its presence on the Las Vegas Strip by acquiring Boyd's Barbary Coast Hotel and Casino. After buying Caesars Entertainment last year, Harrah's now controls some 350 acres of prime strip property.
The company's shares are still down from highs around $83 hit in May. Investors have expressed concern about the company's ambitious capital spending plans for Las Vegas, Atlantic City, New Jersey, and the Mississippi Gulf Coast.
Harrah's, which was listed on the NYSE in 1973, gave no indication that it would agree to a buyout deal or that it should cease to be a publicly trade company. The Special Committee has not determined that a transaction is in the best interests of Harrah's and its stockholders, it said in a statement.
The proposed deal is the latest sign of aggressive private equity investors banding together to make big-ticket offers for attractive targets. In July, an investor group including Bain Capital, Kohlberg, Kravis Roberts and Merrill Lynch struck a deal to buy hospital operator HCA Inc. for $21 billion plus debt.