Monday, Sept. 27, 2004 | 10:38 a.m.
Harrah's Entertainment Inc. and Caesars Entertainment Inc. have signed a definitive agreement to sell four casinos as a package deal to an affiliate of Colony Capital LLC for $1.24 billion.
The casinos include Harrah's East Chicago, Harrah's Tunica, Atlantic City Hilton and Bally's Tunica.
The sale price represents about 8.5 times the trailing 12-month cash flow of the four properties -- higher than other recent casino deals.
Harrah's said it doesn't expect to report any after-tax gain or loss from the sale. The company plans to use the $476 million in estimated proceeds to reduce debt.
Other companies were also interested in buying the properties, but Colony was given the first shot at negotiating a deal for a limited period of time.
Harrah's and Caesars last month announced preliminary talks with Colony to sell the properties in connection with Harrah's $9.4 billion merger agreement with Caesars. The sales were not contingent upon the closing of the merger, the companies said.
In a joint statement today, Harrah's and Caesars said they still expect to consummate the merger by mid-2005.
Harrah's Chief Executive Gary Loveman said customers at Harrah's East Chicago and Tunica properties will be able to accumulate Total Rewards loyalty club credits until Colony assumes control of the properties.
Harrah's spokesman Gary Thompson said there are no current plans to sell any other Harrah's properties in conjunction with the merger.
Colony Capital spokesman Owen Blicksilver said the company is well-positioned to expand its gaming empire.
"Colony has the distinction of being a financial buyer who is in a position to invest in gaming assets and has done that successfully," Blicksilver said.
He said specifics haven't been discussed, but he expects the company will undertake initiatives in marketing and branding for all Colony properties.
The Los Angeles-based private equity firm financed this year's $280 million purchase of the Las Vegas Hilton from Caesars. Colony formerly owned the Harvey's casino in South Lake Tahoe and owns Resorts International in Atlantic City. The company focuses on real estate and has investors that include state and private company pension funds.
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