Harrah’s-Caesars merger gets OK from casino board
Dismissing antitrust warnings, New Jersey casino regulators Tuesday approved a $9.4 billion merger that will create the world's largest gaming company and dramatically tilt the balance of power in the Atlantic City marketplace.The 5-0 vote by the state Casino Control Commission allows Harrah's Entertainment Inc. to acquire Caesars Entertainment Inc. and its two Atlantic City casinos, Caesars and Bally's."We're very happy and we're anxious to get this deal closed. We think this is a great decision for our company and the future of Atlantic City," Timothy J. Wilmott, chief operating officer of Harrah's Entertainment, said after the vote.
The Federal Trade Commission, the Nevada Gaming Control Board and the Nevada Gaming Commission are the only three remaining regulatory bodies that must approve the merger before it is expected to become final June 13. New Jersey joins Indiana, Louisiana and Mississippi in signing off on the deal.Harrah's, which operates 25 casino facilities in the United States, will link up with Caesars' 24 properties on three continents to become a global gaming giant."I think the brands will be complementary. Caesars will provide a higher-end brand than what Harrah's has now," said Eric Hausler, gaming analyst for Susquehanna Financial Group.In Atlantic City, Harrah's Entertainment already owns Harrah's and the Showboat Casino Hotel. The addition of the Caesars and Bally's properties will allow Harrah's to control about 40 percent of the gaming space, hotel rooms and net revenue in the city's $4.6 billion-a-year casino trade.The New Jersey Division of Gaming Enforcement, the casino industry's investigative arm, cautioned that the Harrah's-Caesars colossus could threaten the survival of weaker competitors.
Martin K. Perry, a Rutgers University economics professor and antitrust expert hired by the DGE, urged the Casino Control Commission to impose development restrictions on Harrah's and Caesars to prevent them from dominating the market.Perry proposed establishing "boundary conditions" to prohibit Harrah's Entertainment from gobbling up prime casino-zoned land along the central part of the Boardwalk and in the South Inlet section of the city.However, the commission rejected the notion of geographic boundaries or any other restrictions. It concluded that such limitations could impede growth and were unnecessary given the high level of competition among the city's dozen casinos."I am convinced that today's Atlantic City casino market is vigorously competitive and dynamic, despite the industry trend toward consolidation," said Linda M. Kassekert, commission chair. "Concentration levels and market shares simply do not capture the level of competition that Harrah's will still confront post-merger."Kassekert noted that the commission conducted an exhaustive analysis of the merger to ensure it did not violate New Jersey's law prohibiting casino companies from wielding excessive power, or "undue economic concentration.
"Expressing frustration with the commission's ruling, DGE attorney James C. Fogarty argued that the rules barring undue economic concentration should be strengthened. He suggested that a huge conglomerate such as Harrah's Entertainment could crush the competition by sheer "force of power" unless restraints were applied."I guess it's fair to say we're disappointed that they gave them carte blanche approval," Fogarty said of the commission's vote. "We still think that part of the legislation needs to be looked at."The vote Tuesday wrapped up two days of hearings that included testimony by expert witnesses and senior Harrah's executives. In contrast to Monday's grinding 12-hour session, Tuesday's hearing concluded after only 15 minutes, with Kassekert reading a prepared statement just before the vote was taken.Kassekert said that although the commissioners rejected imposing any limits on Harrah's, restrictions such as geographic boundaries would be considered in the future for other casino mergers."We think it's important to do a case-by-case analysis," she said in an interview after the hearing.Harrah's executives strenuously objected to Perry's proposed boundaries. They maintained that restrictions of any type could hinder Harrah's development plans and slow down Atlantic City's push to add nongaming attractions to complement the casino hotels.
"We're very committed to Atlantic City and we felt that these boundary conditions were unnecessary, given the reasons stated by the commission," Wilmott said. "We didn't want to be encumbered as we move forward with the development of the city."Under questioning by regulators, Harrah's Chairman Gary Loveman said Monday the company has no immediate plans to expand Caesars or Bally's once the merger is completed. He did say that the famous Caesars name will stay on the property, but the less-prominent Bally's moniker is being studied to see whether it is worth keeping.
Among the properties Harrah's will inherit from Caesars is the old Traymore Hotel site, a vacant parcel between Indiana Avenue and Dr. Martin Luther King Jr. Boulevard on the ocean side of the Sands Casino Hotel. The Sands covets the site for an expansion project, but to this point has been unable to acquire it.Wilmott said Harrah's wants to sell the Traymore site because the approximately 9-acre tract is relatively small and does not tie in with any of the Harrah's-Caesars casinos."We've had discussions with potential buyers. I won't name them, but I will say that the Sands seems the most likely buyer given their needs," Wilmott said.
www.pressofatlanticcity.com
2005-05-12
