Harrah’s outbids Jackpot for Players International

David Strow

Monday, Aug. 16, 1999 | 11:40 a.m.

Players International Inc. jilted Jackpot Enterprises Inc. today, as the Atlantic City, N.J. company accepted an unsolicited $425 million bid by Harrah's Entertainment Inc.

Harrah's announced this morning the acceptance of its $8.50 per share offer for Players, topping Las Vegas-based Jackpot's bid by 25 cents a share. The Harrah's offer is valued at $425 million, including the assumption of $150 million in debt. Harrah's said it expects to enter into a binding agreement with Players by Thursday.

Harrah's offer is all cash; Jackpot had offered $6.75 per share in cash and $1.50 in Jackpot stock.

Players said it sent a notice of termination to Jackpot that will take effect in three days. The company will have to pay a termination fee of $13.5 million to Jackpot, which will be advanced by Harrah's.

"We are pleased to have received a superior proposal from Harrah's, a recognized leader in the gaming industry, and have accepted the offer in accordance with the best interests of our shareholders and employees," said John Groom, president and chief executive of Players.

Jackpot Chief Executive Don Kornstein didn't say if Jackpot would attempt to counter Harrah's offer.

"All I cay say is, the board is considering its options," Kornstein said today.

Players operates riverboat casinos at Lake Charles, La., Metropolis, Ill., and Maryland Heights, Mo. Players and Harrah's already jointly operate one of Players' two St. Louis-area casinos. Players also owns a racetrack in Paducah, Ky.

Players stock shot up $1.38 in midday trading to $7.94. Harrah's was at $22.13, up 25 cents, while Jackpot rose 25 cents to $7.75.

Jackpot had seen Players as a way to diversify out of the slot route business. But powerful Harrah's sees Players as a ticket to expand into several new markets, particularly Houston, southern Illinois and northern Kentucky. Harrah's also noted the deal would strengthen "Total Gold," its nationwide customer rewards marketing program.

"It's a great strategic transaction," said Jason Ader, gaming analyst with Bear Stearns & Co. in New York. "It helps advance their strategy of owning a diversified portfolio of casino resorts that provides customers with access to Total Gold ... which will provide tremendous value to shareholders over the next several years.

"Don't be surprised to see Harrah's make more acquisitions over the next several years. They have proven they can create value for shareholders (through acquisitions)."

Ader said it was possible Jackpot could try to counterbid, but added that "it's very hard for a company like Jackpot to compete with a company like Harrah's, especially with the cost savings Harrah's can yield from the (Players) properties."

Harrah's said it expects the deal to boost its annual revenues to $3.5 billion, and annual cash flow to $850 million.

Dave Ehlers, chairman of Las Vegas Investment Advisors, said he was "a little surprised at this price." Harrah's is acquiring the properties for three times the annualized cash flow reported in the last quarter by the Players properties, he said.

"This is a really good price," Ehlers said. "This is just another chip in their portfolio. It's going to benefit Harrah's, definitely."

Harrah's owns and operates 18 casinos in the United States, including the Rio and Harrah's Las Vegas. The company is based in Memphis, Tenn., but is in the process of moving its headquarters to Las Vegas.