ATLANTIC CITY, N.J. (AP) – New Jersey casino regulators on Wednesday approved the proposed $31 billion acquisition of Harrah's Entertainment by two private equity firms.
At a hearing before the state Casino Control Commission, partners in Apollo Management Group and Texas Pacific Group promised to be hands-off owners. They said they don't plan any layoffs or selling off of assets as a result of the merger.
“We invested in Harrah's because we have a tremendous amount of confidence in (chairman and CEO) Gary Loveman,” said Eric Press,a partner in Apollo. “His plans for the business are our plans. We don't intend to change a thing.
“Harrah's has pursued a strategy of growing its assets and investing in its assets,” Press said. “We see no reason why that would change in Atlantic City.”
The deal would be the largest ever to take a publicly held casino company private.
The companies still need approval from 10 other states' regulators before the deal can go through. They will go before casino regulators in Mississippi on Thursday.
The world's largest gambling company, Harrah's operates 50 casinos worldwide, including 38 in the United States. Four are in Atlantic City: The Showboat Casino-Hotel, Harrah's Atlantic City, Caesars Atlantic City and Bally's Atlantic City.
The Atlantic City casinos account for nearly one-third of the company's cash flow.
The $31 billion figure includes debt transactions; the amount of equity involved is about $17.1 billion, said Kelvin Davis, a partner in Texas Pacific Group.
He and Press both said they would have no role in the day-to-day operation of Harrah's, and promised to leave existing management in place. The two men each said they envisioned holding on to Harrah's for at least five to 10 years before selling it at a profit.
“We view this as an unusually good opportunity to invest and hold for a very long period,” Press said. “The public markets saw Gary Loveman and his plans to invest billions of dollars in Atlantic City, and didn't appreciate that.
“Public markets wanted to know what Gary Loveman was going to do for them three months from now,” he said. “We are a much more patient and long-term investor.”
Both sides in the deal said the takeover would give Harrah's the time and money it needs to grow even bigger. Loveman said the deal represents the best possible merger of additional funds and permission to continue on an expansion strategy without major changes being imposed by new owners.
“We don't frankly anticipate that they're going to help us run table games better or train us in how we run the buffet,” Loveman said.
Harrah's debt will double under the merger, from $12.5 billion to $25 billion after the deal closes, said Jonathan Halkyard, the company's chief financial officer. But he said the company will remain financially strong.
“I'm very confident that the corporation will remain very stable financially,” he said. “We can weather a storm, and continue to seize on opportunities that we see.”
Approval for the deal has already been received from the Louisiana Racing Commission, and Iowa casino regulators considered the merger last week, but have yet to act on it.
Closing is expected late this year or early next year.