Harrah’s named leading bidder for Illinois license

By Liz Benston

Friday, March 5, 2004 | 11:40 a.m.

Illinois regulators today selected Harrah's Entertainment Inc. as the leading bidder for a casino license that will be sold at auction next week.

Harrah's -- which also had the highest bid of $375 million -- beat out bids worth slightly less from competitors Isle of Capri Casinos Inc. and Midwest Gaming and Entertainment LLC. The two companies will have a chance to top the Harrah's bid at a public auction March 10.

The sale of the casino license is being conducted under a bankruptcy reorganization plan negotiated by the Illinois attorney general and approved by a federal court. The Bankruptcy Court in Chicago, where the state's 10th license has been tied up for years, is expected to confirm a final bid around April 1.

Unlike a traditional bankruptcy proceeding in which qualified bidders can emerge in court up to the last moment, only Isle of Capri and Midwest Gaming will be allowed to make competing bids, upping their original offers.

Isle of Capri's original bid was worth $351 million and Midwest Gaming's original bid, led by Chicago real estate developer Neil Bluhm, was worth $360 million.

Harrah's has partnered with S-L Partners to build a 50,000-square-foot casino in Waukegan, a city north of Chicago and about 15 miles from the Wisconsin border. The casino would be built on a 32-acre parcel located on the site of a former mall and would include 250 to 500 hotel rooms and several restaurants.

Four other bidders, including Caesars Entertainment Inc. and a partnership of Mandalay Resort Group and the Hyatt hotel family, were eliminated from the running last month.

Analysts and other experts have speculated that the Illinois Gaming Board has simplified the auction process by simply selecting the highest monetary bid. But board spokesman Gene O'Shea said regulators are balancing a variety of factors such as the potential tourism and economic development in the region.

According to the Riverboat Gambling Act, which established legalized casinos in Illinois, "authorization of riverboat gambling will enhance investment, development and tourism" in the state. Gaming revenue is also used to "assist and support education."

Harrah's spokesman Gary Thompson said the casino's potential economic benefit is a key consideration.

"Waukegan, of all the potential locations, would benefit the most" from a casino, Thompson said. "It has the highest unemployment rate, the highest minority population. The intent of the Riverboat Gambling Act was to build up these areas that were economically distressed."

The company -- which already owns two Chicago-area casinos -- has estimated the project would take about 15 months to build and would create 1,500 to 2,000 permanent jobs with benefits. About 30 percent of casino revenue would come from Wisconsin residents rather than being diverted from existing casinos in Illinois, Harrah's estimates.

Biloxi, Miss.-based Isle of Capri plans to construct a 40,000-square-foot Caribbean-theme casino in Rosemont, which is closer to Chicago's north side and adjacent to O'Hare International Airport.

Midwest Gaming and Entertainment plans a 40,000-square-foot casino in Des Plaines, about 20 miles northwest of Chicago. Steve Wynn had originally partnered with Bluhm on the Midwest bid but withdrew from the bidding process last month. The potential profit after the state and Bluhm took their cut wouldn't be big enough, Wynn had said.