ITT Offers $1.7 Billion Cash for Caesars World : Gaming: The deal would be the largest single investment in the history of Las Vegas. Caesars' stock soars nearly 50%.

By JESUS SANCHEZ

Dec. 20, 1994 12 AM PT

TIMES STAFF WRITER

Placing an unprecedented bet on the future of the gambling industry, conglomerate ITT Corp. on Monday agreed to buy Los Angeles-based Caesars World--owner of the famed Caesars Palace on the Las Vegas Strip--for $1.7 billion in cash.

The announcement sent Caesars’ lagging stock soaring nearly 50% as some industry observers suggested that ITT--which is expanding in the professional sports, cable and leisure industries--will be joined by other giant entertainment companies interested in the fast-growing gaming business.

“It’s the entertainment dollar that all these companies are competing for,” said gambling industry expert Marvin Roffman, a partner in Philadelphia-based Roffman Miller Associates. “Gaming really is the entertainment business.”

ITT’s offer would be the single largest investment in gambling and Las Vegas ever--topping the $1-billion invested by financier Kirk Kerkorian in building the new MGM Grand hotel-casino--and arguably one of the most significant since Howard Hughes poured at least $100 million into the desert resort city in the mid-1960s, industry observer William N. Thompson said.

“Howard Hughes’ investment was a big signal that gaming was a legitimate (business),” said Thompson, a professor at the University of Nevada-Las Vegas. As analysts warned about overbuilding in Las Vegas and gaming stocks fell in value during the past year, the ITT announcement provided “a tremendous boost,” Thompson said. “They are voting with their money that they have faith in gaming.”

The merger would give Caesars World--which has been criticized for falling behind rivals in expanding--access to ITT’s financial might and a link to the New York-based conglomerate’s Sheraton hotel chain. Henry Gluck would remain as chairman and chief executive of Caesars World, and the company would remain headquartered in Century City under the deal.

“Our main goal is to continue to run the company . . . and then try to look for synergies and find a way to blend the best of what both companies have,” said Gluck, who stands to make $33.5 million through the sale of his 490,055 Caesar World shares.

In return, ITT would gain an immediate and sizable presence in the gambling business through Caesars World, which also owns hotel-casinos in Atlantic City and South Lake Tahoe, and a partial interest in a Canadian casino near Detroit.

With the Caesars acquisition, ITT said it would drop plans announced last year to build a $750-million casino resort--the Desert Kingdom--in Las Vegas on the property of the Sheraton Desert Inn, which ITT recently acquired. Buying an existing casino company became more attractive as gaming stock prices remained depressed and several other firms had proposed building new Las Vegas resorts, the company and analysts said. Several huge casino-hotels--such as Luxor, Treasure Island and the MGM Grand--have already opened in recent months.

ITT did not disclose how it would develop the Sheraton Desert Inn property.

In October, ITT Chairman and President Rand V. Araskog called Gluck to propose the deal.

“Caesars is one of the great names in the gaming industry,” Araskog said in a statement. “The acquisition helps ITT create one of the premier hospitality, gaming and entertainment companies in the world.”

Under the deal, ITT would pay $67.50 for each Caesars share, a bid high enough to be hard for potential rivals to match, industry analysts said. The deal must be approved by stockholders as well as gambling regulators in Nevada, New Jersey and Canada.

ITT said it will finance the deal through the sale of its financial services division, which is expected to be completed by the end of this month.

On Monday, Caesars shares soared $20.625 to close at $65.875 on the New York Stock Exchange on volume of 7 million shares. Caesars stock had risen $2.625 on Friday. ITT shares eased 37.5 cents to $81.50 on Monday.

Other gaming stocks also rose Monday. Circus Circus jumped $1.375 to $22.75, Mirage Resorts gained 50 cents to $20.125, Promus added 87.5 cents to $30.125, Showboat rose 50 cents to $13.25 and Players International surged $1.25 to $20.25. But Beverly Hills-based Hilton Hotels dropped $1.125 to $68.

Since it opened in 1968 as one of Las Vegas’ first themed gambling resorts, Caesars Palace has been a mecca for high-rolling gamblers from around the world. In recent years, Caesars has added a glittering shopping mall and plans to build an entertainment complex featuring magic shows and shops.

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A Heavyweight Matchup

Caesars World stock soared Monday after the big casino company agreed to be bought by ITT Corp.

* CAESARS WORLD INC.

Headquarters: Century City

Chairman: Henry Gluck

Employees: 9,673

Incorporated: 1958

Leisure / gaming holdings: Two casino-hotels in Nevada and a casino-hotel in Atlantic Cty. Four resorts in Pennsylvania’s Pocono Mountains.

Fiscal 1994 revenue: $1.015 billion for year ended June 30, 1994, up 3.3% from 1993

Fiscal 1994 profit: $78.4 million, down 5.8%

Monday stock price: $65.875, up $20.625