A Harrah's/Park Place takeover was tipped as early as 1998. At the time, when they could have been redeveloping the Las Vegas Strip or Atlantic City, casino companies took advantage of the low cost of capital to gobble up one another. The rationale was that, as casinos became more and more expensive to build, it was more cost effective to obtain existing assets, often in other jurisdictions, instead. Harrah's Entertainment was one of the most aggressive practitioners of this, swallowing up the Horseshoe, Harvey's, Players International, Rio, and Showboat brands, among others.
Las Vegas Sun reporter Gary Thompson wrote at the time, "Corporate acquirers will be looking to offset their exposure to overbuilt markets such as Las Vegas with footholds in geographically diversified locales that can help diminish of regional downturns."
The Harrah's/Park Place acquisition talk went quiet for a few years, then resurfaced in 2001, when Sun reporter David Strow (who, like Thompson, would go on to become a Harrah's corporate spokesman) wrote that Harrah's was circling a Park Place takeover. According to his sources, "Several months ago, Harrah's officials examined a possible marriage with Park Place, but nothing came of it."
In fact, Merrill Lynch gaming analyst David Anders told Strow, "That's a real long shot. Part of the reason acquisitions make sense for Harrah's is they can take properties and plug them into Total Rewards ... I just don't know how many Park Place properties you can do that to."
"From a macro perspective it makes sense for the two companies to merge because one is dominant in the riverboat market," rejoined Deutsche Bank gaming analyst Andrew Zarnett, "and one is dominant in the destination market. But there's too much of a culture difference between the two companies and I think Park Place would want to be in the driver's seat. I don't think Harrah's would want that."
Things went quiet for another few years when, in a me-too move in 2004, Harrah's finally bid on Park Place in an effort to keep up with MGM Mirage's acquisition of Mandalay Resort Group. Harrah's stood to gain 27 casinos in five countries and 54,000 employees, as well as considerable debt to go with the $5 billion it was already carrying.
Within days of the news breaking, a deal was announced under which Harrah's would buy Park Place and pay $5.2 billion, of which almost $4 billion was debt. Unlike the MGM takeover of /Mandalay, which gave MGM properties in all market tiers, the Harrah's/Park Place merger made less sense from the outside, since it combined two companies whose assets were predominantly bunched in the mid-price niche.
Also unlike the MGM/Mandalay deal, it would entail asset divestitures. Five Harrah's-owned casinos in Atlantic City were deemed one too many, so the Atlantic City Hilton was spun off to Colony Capital (which subsequently ran the property into the ground and lost its Hilton flag). Already the company had sacrificed Harrah's East Chicago (now Ameristar) and Harrah's Shreveport (now Sam's Town) to make the $1.45 billion Horseshoe buyout palatable to regulators.
In addition, anti-trust concerns were raised when the takeover was announced, which would effectively divide the Strip into a duopoly controlled by MGM and Harrah's.
Harrah's caught Park Place at a vulnerable moment. CEO Tom Gallagher had never found a comfortable footing at the company and had resigned to take a short-lived flier into politics. His successor, the lackluster Wally Barr, was scarcely settled into the CEO's chair when Harrah's came calling. The company was also perversely bent on selling one of its signature assets, the Las Vegas Hilton (now Westgate Las Vegas), despite Barron Hilton's affection for the property.
While Harrah's had no use for the Hilton, the mega-deal enabled it to go from a two-casino (Harrah's Las Vegas and the Rio) presence in Las Vegas to seven. It added Caesars Palace, Flamingo Las Vegas, O'Shea's, Bally's, and Paris-Las Vegas to its Strip portfolio, which would be swelled further by one-off acquisitions of the Imperial Palace (now LINQ), Barbary Coast (the Cromwell), and Planet Hollywood.
Even so, then-CFO Charles Atwood tried to differentiate Harrah's big gulp from MGM's, saying, "Their deal is more about a big exposure to one market, while ours is more about exposure to many markets."
The merger wasn't benevolent; the ranks of Park Place executives and managers were decimated.
Harrah’s CEO Gary Loveman quickly went shopping for a leveraged buyout of his big new company and in December 2006 he found one. Financed by a group of private-equity funds, the buyout cost a whopping $27.8 billion, including the carryover of $10.7 billion in debt. Had Harrah's stood pat on its Park Place acquisition, it probably could have weathered the Great Recession. However, by the time the LBO was approved in January 2008, the tide was already going out for Big Gaming, and both Las Vegas and Atlantic City were past their historic peaks in gambling revenue.
The assets gained in the Park Place takeover would be juggled among various Harrah's entities during the seven-year period in which the company attempted to stave off increasingly inevitable bankruptcy, with Harrah's (now Caesars Entertainment) losing the race against time in January 2015, seven years to the month after it went private.
With the benefit of hindsight, Harrah's voracious appetite for everything on the menu was its undoing, with the Park Place buyout being the penultimate dish that led to the biggest case of heartburn the casino industry has ever known.
