Gaming merger studied

Friday, Nov. 7, 2003 | 11:14 a.m.

The Federal Trade Commission has asked Harrah's Entertainment Inc. and Horseshoe Gaming Holding Corp. for more information about the pending $1.46 billion acquisition by Harrah's of Horseshoe Gaming, indicating the federal agency is investigating competition issues.

The request was announced today in a joint release issued by both Las Vegas companies. They intend to respond promptly to the request.

Analysts said they were interested in the announcement but had mixed reactions to its importance.

Federal law requires merging companies to submit information to the FTC to ensure that deals don't circumvent anti-trust rules.

In connection with the deal, Harrah's said it intended to sell its casino in Shreveport, La., to avoid potential "overexposure" in that market.

Regulators in Louisiana had indicated they might have concerns about market share concentration in Shreveport. Harrah's plans to acquire Horseshoe's upscale casino in nearby Bossier City, La. In addition to acquiring that upper-tier property, Harrah's would have its existing middle-market casino as well as its lower-tier Louisiana Downs, a race track with slot machines in Bossier City.

Harrah's spokesman Gary Thompson said the company still intends to sell the Shreveport casino and is in discussions with more than one potential buyer.

Thompson said he didn't know where the government's anti-trust concerns might lie and that it hadn't received any formal letter from the FTC detailing those concerns as of yesterday.

The announcement doesn't shed any light on whether the government is concerned about any other properties outside of the Shreveport market, Jacques Cornet, a bond analyst with CIBC World Markets, said.

"The investment community, as far as FTC oversight, viewed Shreveport as the risk in terms of market concentration," Cornet said. Investors viewed the government as less likely to scrutinize the acquisitions of Indiana and Tunica (Miss.) properties from Horseshoe, he said.

Harrah's has two casinos near the Horseshoe operation in Indiana, but it's unclear if that's the market the federal regulators are concerned about. Harrah's also has a casino in Tunica.

The announcement may have greater implications for the industry as a whole, however, another analyst said.

"We've been kind of waiting for the federal government to figure out whether there is too much market concentration in gaming," said Ray Cheesman, a bond analyst with Jefferies & Co. "So far no (gaming company) has really been held up hard."

"It's not a shock that we've arrived at this question" given the market concentration of some companies operating in major gaming markets such as Las Vegas and Atlantic City, Cheesman said.