Harrah’s in Britain deal

Wednesday, June 25, 2003 | 11:25 a.m.

SUN STAFF AND WIRE REPORTS

Harrah's Entertainment Inc. of Las Vegas today said it and Gala Group Ltd., a U.K. operator of gambling clubs, plan to invest as much as $1 billion in developing as many as eight Gala-brand casinos in Britain.

Word of the potential deal was first reported June 13 by the Financial Times newspaper.

Harrah's and closely held Gala, with its head office in Nottingham, England, intend to build casinos that will each have between 30,000 square feet and 50,000 square feet of gambling space, Gala Chief Executive John Kelly said.

Harrah's follows MGM MIRAGE of Las Vegas and Kerzner International Ltd. in entering the U.K. casino market in expectation of new regulations and after a number of U.S. states, including Maryland, failed to pass proposed legislation to expand gambling, an analyst said.

"In North America there haven't been too many markets opening up," said Joseph Greff, an analyst at Fulcrum Global Partners. He has a "neutral" recommendation on Harrah's.

Harrah's stock rose 49 cents, or 1.2 percent, to $41.88 at 10:15 a.m. in New York today. The shares have risen 5.8 percent in 2003.

Casino magnate Donald Trump is also in talks to open a casino in London's West End, Trump told the Sunday Express on June 15. Other possible sites for Trump include Blackpool and the Thames Gateway to the east of London, the newspaper said. Trump could partner with Harrods Department Store Co. owner Mohamed Al-Fayed, the newspaper said.

The U.K. is considering legislation that would allow casinos to advertise and end rules that require players to join casinos 24 hours before placing a bet. The government last year allowed casinos to serve alcohol and offer live entertainment on the gambling floor.

Kelly wouldn't say where the two companies are negotiating to open casinos. Some would include 300 to 400 hotel rooms.

Gala says it has a 40 percent share of the U.K. bingo market, with 166 outlets, and has 28 casinos. Harrah's, with 26 U.S. casinos, ranks behind Park Place Entertainment Corp. of Las Vegas among the largest U.S. casino companies based on annual revenue.

Private-equity companies Cinven Ltd. and Candover Investments Plc this year bought Gala from CSFB Private Equity, a unit of Credit Suisse First Boston, and PPM Ventures Ltd., part of insurer Prudential Plc, for 1.24 billion pounds ($2.1 billion).

Gary Loveman, Harrah's president and chief executive, said the 50-50 joint venture would represent a combination of each company's strengths.

They proposed deal would also allow them to continue to expand in their respective core markets -- community-based casinos for Gala and large-scale destination casino resorts for Harrah's.