Fallout from Harrah's Acquisiton of Horseshoe

Jack Binion, looking like a man who had won the lottery, had a few words for the LVRJ after the sale of his riverboat casinos to Harrah's was announced:

Lucky and proud.

That's how Jack Binion said he felt Thursday after he and Harrah's Entertainment executives signed a $1.45 billion deal for Harrah's to buy his Horseshoe Gaming Holding Corp. and its three riverboat casinos.

Binion started the company in July 1994, and in less than a decade built a company Harrah's was willing to pay almost one-and-a-half billion dollars for. The deal carries the biggest price for the sale of a privately held casino company and also would mark the third-biggest casino company sale ever.

Horseshoe's riverboats in Hammond, Ind.; Tunica, Miss.; and Bossier City, La., are the top-performing casinos in their markets. Harrah's plans to keep all three properties and operate them under the Horseshoe brand. Existing Harrah's-branded or owned casinos could also be switched to the powerful Horseshoe brand, Harrah's executives said Thursday.

"Credit goes to the Horseshoe team," Binion said of the company's incredible growth and its big sticker price. "I've got a lot of talented people. My one real talent is recognizing talent."
FULL STORY

I've got a hunch that the story isn't entirely over. Much of the top Horseshoe management will be unemployed, and the story says that they may form a casino management company. Or they may the targets of a reverse acquisition deal along the lines of Circus Circus and Gold Strike Resorts a while back.
I have a hunch about Jack Binion as well. With the proceeds from the sale of his riverboats, he would have more than enough cash to buy back the Las Vegas Horseshoe, extensively renovate, and market it as downtown's high roller haven.
Downtown is going to look much different in a few years. The Barrick group will be buying the Gaughan properties and the Golden Nugget will have new ownership as well. With Binion in the mix, this would completely reshuffle the deck and open up tremendous opportunities.
There isn't anything about this in the news, and I don't have any inside into--this is just my hunch. I've been right and I've been wrong. But I thought that when Binion moved his corporate headquarters here a few months ago that his reacquiring the LV Horseshoe might be in the cards. I somehow doubt that he moved his company to Vegas just because he likes Summerlin.
More on this as it develops.
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Of Racinos and Indian Casinos

Steve Wiegand of the Sac Bee has a great article about the spread of racinos and, in California, possible obstacles to their creation that Indian casino operators may impose:

Louisiana Downs is the newest entry in a hybrid breed of gambling venture. Part racetrack, part casino, it's a "racino." Equipped in May with about 900 slot machines -- a number that will rise to 1,500 next year -- the 29-year-old thoroughbred and greyhound track is emblematic of the racing industry's efforts to hold onto its piece of the country's mammoth gambling pie.

With a half dozen states already hosting racinos and at least a dozen more considering the idea, California's racing industry is becoming increasingly fearful of being left at the starting gate. So the Thoroughbred Owners of California (TOC) has been quietly shopping for a way to get the state's tracks a share of the slot-machine action.

"It's certainly something we'd like to do," said John Van de Kamp, former state attorney general and current president of the TOC. "The industry is hurting; it's stagnant in terms of its revenue growth. We are facing competition from other states. ... Clearly California has to do something to compete.

"We have 50,000 people employed in the horse-racing industry in this state. If we continue to lose our edge over other states, as we are right now, those jobs are going to be gone."

Van de Kamp knows the chance that California tracks will get in on slot action anytime soon is about as good as a three-legged armadillo's shot at winning the Kentucky Derby. He has a ready two-word explanation why: "The Indians."

He means the 62 California tribes that have exclusive compacts with the state to operate Las Vegas-style casinos and are not keen on competition.

"They are a formidable opponent," he said. "They have the money and the demonstrated political clout to make it a very uphill fight for us."

California Indian tribes have contributed more than $120 million since 1998 to political campaigns and causes and have fiercely protected their current voter-approved monopoly on casino gambling. Any change would require amending the state constitution.
FULL STORY

All in all, a detailed look at the racino industry and how it impacts both horseracing and casino gaming.
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Soon we'll found out who is the real revolutionary

Quoting Bob Marley in a headline always feels good. And here it fits. The Tropicana/Fidel Castro saga continues. From the Philadelphia Inquirier:

Yesterday, responding to incensed Cuban Americans from New Jersey to Miami, Tropicana officials said they would alter the two peach-colored billboards that feature the likeness of Castro, cigar smoke rising around him and the words "The next revolution."

Castro stays - but his image will have a circle and a slash through it, Tropicana spokeswoman Maureen Siman said.

And the slogan will be changed to: "The real revolution."

"We are not removing him from the billboard," Siman said. "We will be depicting him in a way that will be very clear as to what the message will be about. We're not making political statements."

The billboards are to promote the Quarter, a $245 million entertainment, dining, retail and spa project set to open this spring that the casino says will be "revolutionary" for Atlantic City.
FULL STORY

What a solution: the old circle and a slash. I guess they figure they already paid the ad agency and they already paid for the billboards, so they're going to use them, even if they offend a large community whose members just happen to include the speaker of the state assembly.
Brilliant.
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That's all for today. Have a great weekend and try not to offend anyone.


posted by Dave at 9:17 AM

HARRAHS TO BUY HORSESHOE

Harrah's Entertainment, continuing in its mission to buy the letters R, S, and H, has announced its plans to acquire Horseshoe Gaming. Brought to you by the letter A and the number 3, here is the announcement, straight from the Harrah's mouth, as it were (I ripped this directly from the press release):

LAS VEGAS, September 11, 2003 – Harrah’s Entertainment, Inc. (NYSE:HET) has signed a definitive agreement to acquire Horseshoe Gaming Holding Corp. for $1.45 billion, including assumption of debt.
Privately held Horseshoe operates leading casinos in Hammond, Indiana, Tunica, Mississippi, and Shreveport-Bossier City, Louisiana. Each of Horseshoe’s shareholders has committed to sell their shares, subject to customary conditions.
Harrah’s also intends to sell its Harrah’s brand casino in Shreveport to avoid overexposure in that market, but will retain its Louisiana Downs thoroughbred horse-racing track and casino in Bossier City. Harrah’s expects no other property sales related to the Horseshoe transaction.
Subject to customary approvals, the acquisition and sale are expected to close in the 2004 first quarter. After consideration of the Harrah’s Shreveport sale, the Horseshoe acquisition would add a net 107,100 square feet of casino space, more than 4,360 slot machines and 138 table games to Harrah’s existing portfolio of 1.53 million square feet of casino space, more than 42,000 slots and nearly 1,150 table games.
“This acquisition enhances our efforts to become the nation’s leading distributor of casino entertainment and bolsters our near-term and long-term growth prospects,” said Gary Loveman, Harrah’s Entertainment president and chief executive officer. “The Horseshoe franchise is a tremendous strategic fit in that its business model, like ours, is centered around gaming and providing outstanding customer service.
“Also like Harrah’s, Horseshoe enjoys an enormously loyal player base and highly recognizable brand,” 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.
“This deal also demonstrates our industry-leading financial strength and flexibility, which allow us to pursue attractive growth investments and maintain our debt rating even while distributing a sizable dividend to our shareholders,” Loveman said. “Coupled with our longer-term expansion prospects in both the United States and United Kingdom, the Horseshoe acquisition positions us for a decade of growth.”
The acquisition is not subject to financing, and Harrah’s expects to maintain its investment-grade credit rating.
“At a price of about 7.2 times analysts’ estimates for Horseshoe 2004 earnings before interest, taxes, depreciation and amortization, this acquisition is both fair to the sellers and is expected to be immediately accretive to our earnings,” Loveman said. “In addition, within two years of closing the transaction, we expect to achieve about $36 million of annual savings from operating synergies.
“Horseshoe Gaming owner Jack Binion has created enormously popular casinos providing the high-quality amenities and superior customer service and recognition that generate lasting player loyalty,” said Loveman. “We are especially pleased that Jack, who has developed personal friendships with so many of his players, has agreed to assist us with the ownership transition for the three casinos that will continue to bear the Horseshoe name.”
The purchase agreement calls for Binion to provide guidance on both the integration of the Horseshoe properties into the Harrah’s network and expansion of the Horseshoe brand into other markets.
“In addition to retaining the Horseshoe name, the three acquired properties will continue to focus on providing superior, distinctive casino entertainment to their customers,” Loveman said. “Once integration is complete, Horseshoe customers will be included in our Total Rewards player-loyalty program and Harrah’s customers will be able to redeem rewards at Horseshoe casinos.
“Total Rewards and our nationwide geographic distribution were key factors in the 20 percent growth of cross-market play at our casinos last year,” Loveman said. “We expect the addition of the high-quality Horseshoe properties and customer base to our portfolio to enhance that performance.”
Harrah’s Entertainment was advised

So Horseshoe properties will remain Horseshoe properties, but I would expect to see changes. Just like the new owner or GM of a team will inevitably fire the coach/manager, you don't spend over $1.4 billion on three casinos to leave them alone. Hopefully this goes more smoothly than the integration of the Rio into Harrah's Inc.
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NEW TROPWORLD ORDER?

That's for those who remember the days of Tropworld, in the late 80s/early 90s, when Atlantic City's Tropicana decided to take one of its biggest assets--it's immediately-recognizable name--and change it to TropWorld. Well, they're at it again. For some reason known only to Trop execs and their confidantes, they decided to create a buzz for their renovation project by using the image of Fidel Castro to promote it. This article from the AC Press hits the nail squarely on the head:

When Fidel Castro capped his revolution in Cuba by entering Havana on New Year's Day 1959, many of his exultant followers looted the city's casinos.

The gaming halls, including one named Tropicana, were examples of capitalist corruption, Castro's communists said.

Now, Castro's likeness is shilling for a local casino - also with the name of Tropicana - on a billboard advertisement that is angering Cuban Americans, including Assembly Speaker Albio Sires, D-Hudson. He is calling for a boycott of the gaming hall.

The Tropicana Casino and Resort billboards are along Route 40 and the Atlantic City Expressway. They show Castro's likeness and his trademark cigar, and have a slogan, "The Next Revolution."

Tropicana spokeswoman Maureen Siman said the advertisements are for The Quarter, the casino's $245 million entertainment, dining, retail and spa development project.

"The point is, what we're doing is revolutionary," Siman said. "The project is going to change Atlantic City in a positive way, in a revolutionary way.

"We are not making a political statement."

But officials with the Cuban National American Foundation in Miami said Wednesday that callers from the Atlantic City area feel otherwise.

"They are letting us know about this and are expressing their dismay that such a display is in place and using the figure of a killer like Castro," foundation spokeswoman Mariela Ferretti said.

"There's no question that it's pretty distasteful. It's just unfortunate that someone should choose to portray a figure of a man who still has 11 million subjugated citizens on the island.

"Based on that slogan, it doesn't bode well for Atlantic City," Ferretti said.

While New Jersey has a sizeable Cuban-American population, Ferretti said, the foundation is getting complaints from both Cuban Americans and non-Cuban Americans....
According to Siman, the phone calls and controversy are an indication that Tropicana's advertising message "is not clear."

"We are looking at ways on how to make our message more clear," she said.

The whole idea of Castro supporting a casino is rather ironic, especially given the message Castro and his forces were trying to send when they pillaged Havana's casinos, Ferretti said.

"It was a statement they were making, that the revolution was against all of that," she said. "They saw it as a social evil."
FULL STORY

Stories like this make my job simple and enjoyable. This just so perfectly captures the limited historical depth that many bring to the table. Perhaps a more distant revolution, with no living victims, would have been more appropriate. At least they didn't use Usama Bin Laden.
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SUBURBAN XANADU UPDATE

amazon.com sales rank: 753,119, still 2 reviews

bn.com sales rank: 163,913, still 2 reviews

A week from today, on Thursday, September 18, at 7pm, I am having a signing at the Summerlin Barnes and Noble.

That's all for today.

posted by Dave at 9:16 AM

DARK DAY IN AC

Workers at Donald Trump's three casinos in Atlantic City got horrible news this week, when they learned that 300 of them are losing their jobs. From the AC Press:

More than 300 Trump year-round employees, predominantly full-timers, lost their jobs this week as the casino company struggles with new competition, higher gaming taxes, a soft economy and declining financial results.

The job cuts affected all departments at the three Atlantic City Trump casinos - Trump Plaza Hotel and Casino, Trump Marina Hotel Casino and Trump Taj Mahal Casino Resort - and all job levels, but were felt mostly at the supervisor and middle-manager level, said Craig Keyser, executive vice president for human resources and administration. Fewer than 20 of the jobs cut were part time, he said.

"Payroll is our largest expense, and we have to aggressively manage it," Keyser said Friday. "This is the season when you aggressively explore labor savings. This is not new for any casino in Atlantic City and certainly not new for us."
A veteran Taj Mahal casino-floor employee described the work-force mood as horrible.

"I feel pretty secure, but I'm scared," said the woman, who asked that her name be withheld.

"(Donald) Trump gave away $100,000 last week (in a contest) and now is laying off people who have been working here 13 years, so people are not too happy about that," said another Taj employee, who has worked in food and beverage since the casino opened in 1990.

"People are really making sure they're doing their jobs right this week," he said.

The job cuts were disproportionately higher at the flagship Taj Mahal, which had 4,446 full-time employees as of Monday, Keyser said.

The Trump casinos have struggled this year. Their first-half gross operating profit declined 15 percent to $125.7 million. The opening of Borgata led to a 9 percent decline in combined July gambling revenue at the three casinos, including a 19 percent decline at Trump Plaza.
FULL STORY

The casino industry is often one that is not pretty, and this is a perfect example. To make matters worse, the Taj, which is the strongest of the three casinos, had to bear the brunt of the cuts.
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That's all I have right now--it was apparently a slow news weekend for gaming. I had a very busy weekend myself--I wrote a week's worth of lectures, got a little done on the book, and recorded a few commentaries that will air on KNPR, Nevada's Public Radio. When I find out the airdates, I will post them, of course.
posted by Dave at 10:53 AM