Wynn had talks with Binion

David Strow

Thursday, April 18, 2002 | 11:08 a.m.

Casino moguls Steve Wynn and Jack Binion have discussed a potential merger of their companies or other business combination, sources told the Las Vegas Sun Wednesday.

But whether those talks are still ongoing is not clear. One source said they were ongoing, while another said the two sides ended discussions recently.

Binion, once the owner and operator of downtown Las Vegas' Binion's Horseshoe, now controls Horseshoe Gaming Holding Corp., one of the country's largest privately held gaming companies. Horseshoe owns three riverboat casinos in Indiana, Mississippi and Louisiana. In 2001, the company produced $225 million in cash flow. The company's "free cash flow" -- defined as cash flow after capital expenses, cash interest and cash tax payments -- was $108.1 million in 2001.

Wynn has two very sizable projects on the drawing board -- the $1.65 billion Le Reve on the Las Vegas Strip and at least one casino in the Chinese port city of Macau.

A corporate marriage with Horseshoe Gaming would give Wynn Resorts immediate, substantial cash flow that could be used to service a big debt load. That could make it easier for Wynn and his financial right-hand man, Ron Kramer, to raise funds for Le Reve and Macau, sources said. Until joining Wynn Resorts, Kramer was a Wall Street investment banker specializing in gaming deals.

"Steve has looked at ways of raising capital, and has also looked at perhaps issuing equity," a gaming industry source said. "Maybe this is a way of doing that. It gives him (Wynn) a stable of cash flow he could leverage and finance."

Wynn and Binion have been friends since the days both operated downtown Las Vegas casinos -- Wynn at the Golden Nugget, Binion at the Horseshoe Club. And Kramer is apparently close friends with Andy Astrachan, financial adviser to Horseshoe.

"I would say they (Kramer and Astrachan) are talking," one source said.

That Binion would be looking to sell isn't surprising, sources said, as he's been looking to sell Horseshoe for quite some time. The key issue, however, is whether Wynn could offer enough to Binion to close on a deal -- and that has some observers doubting a deal could even be struck.

One noted that casino companies sell for seven to eight times annual cash flow -- placing the potential value of a deal for Horseshoe well in excess of $1 billion. "That's what Jack wants, over a billion (dollars)," a source said.

"(A deal) is certainly possible," the source said. "Ron Kramer is an experienced dealmaker on Wall Street. But it's not immediately obvious how it would be financed."

Wynn could also offer Binion equity within Wynn Resorts, but the riverboat casinos produce so much cash flow that Binion would have to be given a considerable share of the company's stock.

In the end, one source said, Wynn was unwilling to place the financing efforts for Le Reve on hold to work through the issues, and the two sides recently ended their talks.

"Steve doesn't want to wait nine months ... he wants to get going (on Le Reve) now," the source said. "They were floating the idea of a prospective merger, and while a good idea, various issues led them to disband pursuing it further."

Wynn and Horseshoe officials could not be reached for comment.