Just one of three affected states investigating merger

By Liz Benston (contact)

Thursday, Nov. 20, 2003 | 11:13 a.m.

Regulators in states where Harrah's Entertainment Inc. expects to buy casinos from Horseshoe Gaming Holding Corp. are taking different approaches in their examination of the pending deal.

In September, Harrah's announced a $1.46 billion deal to acquire Horseshoe -- which owns casinos in Bossier City, La., Tunica, Miss., and Hammond, Ind. Harrah's, which owns casinos near each of those markets, intends to sell an existing casino in Shreveport, La., in conjunction with the buyout.

Regulators in Louisiana, Mississippi and Indiana must approve the merger along with the Federal Trade Commission, which is conducting a separate investigation into competition issues in all three states.

While gaming regulators in Louisiana -- through the state's police agency -- have initiated their own investigation of the merger, Mississippi and Indiana are awaiting the outcome of the FTC investigation.

Louisiana Gaming Control Board Chairman Hillary Crain has expressed concern over the years about any entity owning more than one license in a particular market, Lana Tramonte, the chairman's principal assistant, said.

After Harrah's notified Louisiana regulators of the pending deal, state regulators told the company it would have too much market concentration in Shreveport if it did not sell the Shreveport casino.

Mississippi regulators haven't expressed opinions one way or the other about the acquisition, Mississippi Gaming Commission spokeswoman Leigh Ann Wilkins said.

Too much market concentration hasn't been much of a concern in a state that already has 29 casinos and 10 in Tunica alone, Wilkins said.

Regulators are still following the FTC investigation closely, she said.

Indiana regulators haven't yet weighed in on the deal, though the state recently made it legal for casino companies to operate more than one property, Indiana Gaming Commission spokeswoman Jennifer Arnold said.

"There's no specific language that would prohibit an acquisition based on a problem with competition," Arnold said. "Of course, the ultimate decision does lie with the commission so that may be a factor in their decision."

Analysts said they anticipated federal scrutiny in Louisiana because Harrah's would be acquiring a third casino in the Shreveport-Bossier City market, leaving only three remaining competitors.

Harrah's owns a casino each in Shreveport, Lake Charles and New Orleans as well as a racetrack with slot machines in Bossier City.

With the acquisition and absent any asset sales, Harrah's would have an upscale Horseshoe casino in Bossier City, its middle-market casino in Shreveport and its lower-tier racino in Bossier City.

Analysts said they don't see as many concerns in Mississippi and northern Indiana because Harrah's has fewer casinos in those markets. Even after picking up a Horseshoe casino in each area, Harrah's would be competing against a proliferation of casino competitors nearby with deep pockets, they said.

The company's only Mississippi casino is near Horseshoe's Tunica property. But Harrah's Tunica isn't a market leader in the region, in which Park Place Entertainment Corp. already owns three of the area's 10 casinos, analysts said.

Harrah's also owns one casino in East Chicago, Ind., and another in Joliet, Ill., less than an hour from Chicago. Horseshoe's Indiana casino is close to Chicago near the Illinois border. The Chicago area has several major casinos within a couple of hours of one another operated by the likes of Trump Hotels and Casino Resorts, Mandalay Resort Group and Boyd Gaming Corp.

This month Harrah's and Horseshoe disclosed that the Federal Trade Commission asked both companies for more information about the merger. The request could delay the deal, originally expected to close by March, by extending by 30 days the waiting period imposed under federal antitrust laws.

The FTC requested information about competition in each of the three states in question, Harrah's spokesman Gary Thompson said.

"If we have not yet supplied all the information that state and federal regulators have required we are in the process of filing that information," Thompson said.

Separately, Harrah's is still negotiating with more than one potential buyer to sell the Shreveport property, Thompson said.

The company has declined to quantify or name the potential bidders.

Plans to sell the property being public hasn't hurt the deal's prospects because there are multiple bidders involved who don't know who they are bidding against, Thompson said.

"Competition is good if they're competing for your product," he said.

The FTC similarly delayed a $675 million buyout of the Harveys Casino Resorts chain by Harrah's in 2001 by requesting more information. At the time, the FTC said it wasn't necessarily opposed to the acquisition and didn't have enough information to approve it within the initial 30-day waiting period. Harrah's acquired a third Lake Tahoe casino in the deal, after convincing regulators that South Lake Tahoe was not a distinct market but part of a larger, Northern Nevada/California market.