Wednesday, April 29, 1998 | 10:29 a.m.
Nevada Gaming regulators Tuesday approved Harrah's Entertainment Inc.'s $1.15 billion acquisition of Showboat Inc.
The deal, which will give Harrah's control of 21 casinos in 16 worldwide markets, is still subject to the approval of Australian gaming regulators.
In separate special meetings, the Nevada Gaming Control Board and the Nevada Gaming Commission approved the merger within two hours of one another.
Harrah's is paying Showboat stockholders $30.75 per share, and assuming $635 million in Showboat debt. Harrah's, based in Memphis, Tenn., is financing the deal with dual credit facilities totalling $2.1 billion.
In return, Harrah's is getting control of Showboat casinos in Las Vegas, Atlantic City; East Chicago, Ind.; and Australia. Harrah's already operates casinos in Las Vegas, Reno, Lake Tahoe, Atlantic City, Laughlin, Kansas City, St. Louis, Joliet, Ill.; Vicksburg and Tunica, Miss.; and Shreveport, La.; among other places.
Phil Satre, Harrah's chairman and chief executive, said the company is considering the sale of Showboat's off-Strip Las Vegas casino.
"We're going to be evaluating how this property fits into our strategy," Satre said.
The Las Vegas casino caters primarily to locals, rather than the mid-to-upper level tourist market Harrah's serves, Satre said.
Satre declined to say when a decision would be made about the Las Vegas Showboat.
"No resolution's been made on what is going to be the future of that property," he said.
Under the terms of the merger, HEI Acquisition Corp., a Harrah's subsidiary created expressly to acquire Showboat, will be merged into Showboat. Showboat will then become a wholly-owned subsidiary of Harrah's.
Satre said Harrah's plans to continue using the Showboat name as a separate brand. In some markets, having two Harrah's-branded casinos does not work, he said. The company discovered this the hard way in the mid-80's, when it had two Harrah's casinos in Atlantic City, Satre said.
"That created a lot of confusion and dilution of customer interest," he said.
Overall, the merger will improve Harrah's balance sheet, increase operating efficiencies and help the company target its core mid-to-upper market tourist customer base, Satre said.
"Our strategy as a company is to become the brand of choice for our targeted customer base," he said.
The two companies already share the same type of customer, Satre said.
"With this acquisition, we will have greater access to those kinds of customers," he said.
The combined company will have 30,000 employees and $2.4 billion in revenues, making it the second largest casino operator in the world, Satre said.
The acquisition will also help Harrah's by increasing the company's opportunities for cross-marketing, Satre said. He explained that customers who play at casinos in the Midwest and South often end up making trips to Harrah's properties in more established gaming markets.
"Customers that we establish a relationship with in Joliet will begin to show up in our properties in Reno, Atlantic City and Las Vegas," he said.
In fact, Satre said, "Sixty percent of industry revenues are now being generated by people who play in more than one market."
Establishing a presence in markets like Indiana and Australia will attract even more people to Harrah's larger properties, he said.
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