Park Place, Caesars merger hits obstacle in New Jersey

Friday, Oct. 22, 1999 | 11:12 a.m.

The New Jersey Division of Gaming Enforcement is recommending restrictions be imposed on Park Place Entertainment Corp. of Las Vegas because of its $3 billion acquisition of Caesars World Inc.

The New Jersey Casino Control Commission conducted a hearing on the merger Thursday and said it will announce its decision on whether to approve the deal Nov. 3, the Press of Atlantic City newspaper reported.

The deal was approved by the Nevada Gaming Commission in Carson City on Thursday and by Mississippi regulators earlier in the week.

The New Jersey DGE said Park Place should be "discouraged" from expanding or buying more casinos in Atlantic City until planned casinos open in three to five years, the Press reported.

"I think it's nonsense," Park Place lawyer Clive Cummins responded, the Press reported.

The deal would give Park Place three Atlantic City casinos and 27 percent to 30 percent of Atlantic City gaming revenue, casino assets, hotel rooms and employees. The newspaper said these are roughly the same market shares now controlled by Trump Hotels & Casino Resorts Inc.

"We must assure that no one operator will use its dominant position by its size to create a competitive imbalance in the marketplace," James Fogarty, deputy attorney general for the DGE, told the Casino Control Commission, the Press reported.

But, the Press reported, Cummins said gaming industry consolidation is a reality and that the commission should welcome bigger casino operators that can use their low-cost financing to expand and build better resorts.

While the Nevada Gaming Commission unanimously approved the merger, similar concerns about the size of Park Place were expressed by Commissioner Augie Gurrola of Las Vegas.

He said Park Place, with the acquisition of Caesars Palace, will have 29.3 percent of the credit play on the Las Vegas Strip. "That's getting up there," he said.

Park Place attorney Jack Godfrey said state antitrust regulations were enacted when Howard Hughes purchased up to eight casinos in Nevada. He said the regulation "is not a material factor" in the present acquisition.

A study for the state Gaming Control Board showed Park Place will have 21 percent of the business on the Las Vegas Strip; 14 percent in Clark County and 13 percent statewide.

The U.S. Justice Department did not raise antitrust concerns, Godfrey said.

Gurrola also expressed concern that the compliance plan of Park Place didn't address stopping minors from playing slot machines or loitering in the casinos. Several clubs have been fined in recent years for permitting under-aged people into the casinos.

David Arrajj, counsel to Park Place, said the under-aged issue may not be in the company's plan to comply with state and other regulations but he added "there are very strong and vigorous policies" in dealing with minors.

Arrajj said every employee who deals with the public must attend training sessions and there is strict discipline for those workers who disobey the policies. "We won't tolerate this," he said.

Changes, meantime, are in store for Caesars Palace on the Las Vegas Strip when Park Place takes over.

Mark Dodson, executive vice president of Park Place, told the Nevada commission that designers and architects are taking an overall look at the hotel-casino. There's been a "Band-Aid application" in expansions in the past, Dodson said.

Dodson said the Cafe Roma will be moved to the pool area to make room for new area for high rolling gamblers. And Park Place is looking at expanding with a new building to house high-end players.

Outside the hearing, Dodson said, "We're going to take a complete look at the entire flow of the property."

"For example, if we are going to have a nightclub and if we are going to expand and add suites, where should be nightclub be?" he said. Park Place is examining an expansion and improvement of the buffet as well, he said.

Park Place is purchasing the properties from Starwood Hotels & Resorts Worldwide Inc. The deal includes Caesars Palace, Caesars Atlantic City, Caesars Tahoe, the Glory of Rome riverboat in Harrison County, Ind., The Sheraton Casino & Hotel in Tunica, Miss., management of the slot operations at Dover Downs Racetrack in Delaware and various other joint venture, real estate and management contract interests or licenses for gaming properties in Halifax and Sydney, Nova Scotia; Windsor, Ontario; Manila, Philippines; and Gauteng Province in South Africa.

Not included in the sale by Starwood is the Desert Inn on the Las Vegas Strip, nor the 35 adjacent acres.

As part of the transaction, Park Place, which owns the Hilton and Bally's casinos and the newly opened Paris on the Strip, will create a new slot machine-buying company called Consolidated Supplies, Services and System. The new company will be able to buy in volume and receive discounts. It also has tax advantages.