Wednesday, Sept. 2, 1998 | 11:50 a.m.
Jack Binion's Horseshoe Gaming LLC said today it's buying Empress Entertainment Inc., the largest operator of casinos in the Chicago area, for about $600 million in cash and assumed debt.
Closely held Empress, based in Joliet, Ill., owns riverboat casinos in Joliet and in Hammond, Ind. Las Vegas-based Horseshoe, closely held by Binion, owns casinos in Bossier City, La., and Tunica, Miss.
The purchase will get Horseshoe into the Chicago area, the U.S.'s fourth-largest gambling market behind Las Vegas, Atlantic City and Mississippi -- diversifying Horseshoe beyond the two southern U.S. markets where it now operates.
The casinos of the combined company are expected to generate revenue of $800 million this year. Horseshoe revenue now is about $450 million annually.
"It's a very good deal for both companies," said Societe Generale Securities debt analyst John Maxwell. "It creates a company with four casinos in strong markets."
Empress has $150 million in publicly held debt, payable at 8 1/8 percent interest by July 2006. Horseshoe will assume that debt and will borrow about $450 million more to pay for the purchase, Horseshoe President Paul Alanis said.
Horseshoe already has $310 million in public debt including $150 million at 12 3/4 percent due September 2000 and $160 million at 9 3/8 percent due June 2007.
Standard & Poor's said it may lower the companies' credit ratings, in response to the new debt Horseshoe will take on. Both companies' debt is rated "BB," or two notches below investment grade, by Standard & Poor's.
Horseshoe expects to increase the Empress casinos' revenue by marketing more to players of table games, such as blackjack and craps, Alanis said. Empress has concentrated more on bringing in people who like to play slot machines.
"I think the high-rollers are there," Alanis said. "Can you imagine the number of high-rollers who live in the city of Chicago?"
Alanis said Horseshoe will offer more credit to table game players. It will also promote the Empress casinos as offering table games with better odds and higher betting than its competitors.
That follows the marketing strategy used by Binion for his southern U.S. casinos.
Empress and Harrah's Entertainment are the only casino operators in the Chicago area with two, rather than one, casinos. The market has suffered from over capacity and high gaming taxes in Illinois.
"The Midwest offers great potential for investment, because it is one of the fastest growing gaming areas of the United States," said Binion, chairman of Horseshoe Gaming. "Bringing Horseshoe's innovative marketing and gaming philosophy to Empress Entertainment is sure to increase Horseshoe's market share in the Midwest market."
Binion founded Horseshoe Gaming in 1993. He is the son of Las Vegas gaming legend Benny Binion, founder of the Horseshoe Club hotel-casino in downtown Las Vegas.
In June, he and two siblings sold their interest in the Las Vegas club to their sister Becky Behnen. The buyout settled Behnen's lawsuit accusing Jack Binion of mismanaging the property and diverting its resources to his Southern casinos.
Horseshoe Gaming reported operating earnings for the quarter ended Dec. 31 of $19.5 million, about even from the year-earlier period. Those earnings were before interest, taxes, depreciation and amortization, and special charges.
Hilton Hotels Corp. and MGM Grand Inc. had also been seen as possible buyers of Empress.
Horseshoe Gaming and Hollywood Park Inc. recently ended a joint venture to try to develop a casino in Indiana.
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