Harrah’s, Rio Hotel to Combine in $888-Million Deal
Seeking to expand its presence in Las Vegas, Harrah’s Entertainment Inc. on Monday said it had agreed to merge with Rio Hotel & Casino Inc.--a 2,500-room casino-hotel off the Las Vegas Strip--in a deal valued at $888 million.
The merger--which must be approved by shareholders and gambling regulators--would help Harrah’s raise its profile among Southern California gamblers and bring in more business from a company marketing program that rewards frequent Harrah’s gamblers with reduced rates and other benefits at its existing properties.
“I think putting these two [companies] together is a nice combination that makes sense,” said gambling industry analyst John J. Rohs at Schroder & Co. in New York.
Under the pact, Memphis, Tenn.-based Harrah’s will buy all of Rio shares in a 1-for-1 stock swap valued at $518 million, based on Harrah’s Friday closing price of $18.88. Harrah’s would also assume $303 million in Rio Hotel debt.
Anthony A. Marnell II, chairman and chief executive of Rio, will become vice chairman of Harrah’s and join the board of directors.
Harrah’s chairman and president, Philip G. Satre, said in a statement that his company sees “an unprecedented opportunity to introduce Harrah’s loyal customers to the Rio’s resort-style property, as well as introduce Rio customers to Harrah’s Entertainment’s 19 properties.”
Industry analysts said the addition of Rio Hotel would increase the success of Harrah’s Total Gold card program, which rewards frequent slot machine players with points that can be redeemed toward hotel accommodations, food and other benefits at any Harrah’s property. Most Total Gold members have wanted to redeem their points in Las Vegas, where Harrah’s has only one casino-hotel, industry analysts said. That site, although it was remodeled recently, still lacks the amenities of rival companies’ newer Las Vegas resorts, they said.
The Rio Hotel & Casino is off the Las Vegas Strip--where most of the city’s prominent gaming properties are--but has nevertheless been able to win a strong following with its high-end restaurants, upscale shopping and emphasis on service. The all-suites hotel includes 125,000 square feet of casino space and 35 acres for possible expansion.
The merger would give Harrah’s customers “a top-notch facility in Las Vegas,” said industry analyst Robert D. Curran at Jefferies & Co. in Los Angeles.
Harrah’s and Rio are also investors in a new Las Vegas-based airline that is designed in part to increase the number of affordable flights there.
In New York Stock Exchange trading on Monday, Rio stock closed at $19.50, up 62.5 cents, and Harrah’s stock closed at $10.25, up 12.5 cents.
