SOURCE: Bloomberg

Harrah's Entertainment Inc., the world's largest casino company, accepted a $17.1 billion offer from Apollo Management LP and Texas Pacific Group in the fourth- biggest private-equity buyout ever.

Harrah's investors will get $90 a share in cash, the Las Vegas-based company said in a statement today. Including the assumption of $10.7 billion in debt, the transaction is about $27.8 billion. Harrah's plans to complete the deal in one year.

Harrah's, which bought Caesars Entertainment Inc. last year for $9.4 billion, attracted the firms with ample cash holdings that can be used to pay the loans financing the purchase. Harrah's generated $1.08 billion of cash from operations this year through September, almost double its 2005 total.

``You think of Harrah's, it's a big elephant that takes the whole tribe to bring down,'' said Joseph Weinert, editor of the Gaming Industry Observer, a trade publication in Atlantic City, New Jersey. ``This outfit apparently had some big guns.''

Harrah's said Oct. 2 the buyout firms initially offered $15.1 billion, or $81 a share, a bid later raised to $15.5 billion, or $83.50 a share Oct. 11.

Shares of Harrah's rose 12 cents to $82.30 before being halted at 3:36 p.m. in New York Stock Exchange composite trading. The $90-a-share offer is 35 percent higher than Harrah's closing price on Sept. 29, the last trading day before the initial bid was announced.

Harrah's Properties

Harrah's owns 42 casinos in eight states and operates four U.S. tribal casinos and one Canadian property. Overseas, it owns 11 casinos in Egypt, South Africa, the U.K. and Uruguay and is opening locations in the Bahamas, Slovenia and Spain.

The deal may take 12 to 18 months to complete as the new owners apply for gambling licenses in the states and countries where Harrah's does business, said James Hardiman, an analyst at FTN Midwest Research Securities in Cleveland. The company may also sell assets to pay off debt, he said. Penn National Gaming Inc., a casino company with one-fifth Harrah's market value, had teamed with hedge fund D.E. Shaw and Co. to bid $87 a share in cash and stock, the Wall Street Journal reported last week.

At $90 a share, Texas Pacific and Apollo would be paying less for Harrah's earnings than what Las Vegas Sands' or MGM's profits are worth on the stock market. Harrah's is being valued at 21.4 times projected 2007 earnings, based on the average estimate of 18 analysts surveyed by Bloomberg. That compares with a 23.1 ratio for MGM Mirage and 51.5 for Las Vegas Sands Corp., according to Bloomberg data.

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