Qantas buyout firm in $24b casino bid - Who is Texas Pacific Group?
Tuesday December 19, 2006
By Caroline Hummer
The deal to buy Harrah’s Entertainment would be one of the top 10 largest private equity buyouts this year.
Fresh from helping to lead the buyout of Qantas Airways, private equity firm Texas Pacific Group is close to reaching a deal to buy the world’s largest casino operator, Harrah’s Entertainment.
Texas Pacific, with equity firm Apollo Management, has made an increased US$16.7 billion ($24.2 billion) bid, sources say.
Casino deals have been rife this year as executives try to move their businesses away from the pressure of public markets amid strong demand from private equity firms that are branching out into new areas with hundreds of billions of dollars to spend.
Details of the buyout were still being worked out and the companies may fail to reach an agreement, but the transaction could be announced this week.
The latest offer may be worth up to US$90 per share, or US$16.7 billion, sources said, versus an initial US$15 billion offer.
The deal would be one of the top 10 largest private equity buyouts this year.
A deal would end a takeover saga set in motion more than two months ago, when Las Vegas-based Harrah’s said Apollo and TPG had offered to buy it for US$81 a share. According to sources, they raised the offer soon after to US$83.50 per share. Then, smaller casino operator Penn National Gaming began considering a bid, a source told Reuters at the time, and last week Apollo and TPG were prepared to bid US$87 a share.
Harrah’s, which has so far publicly acknowledged only the US$81 offer, also received a US$87 per share bid from Penn, the Wall Street Journal has reported.
Harrah’s board had set a December 12 deadline for bids and then met last week to review the offers, according to sources.
Harrah’s stock closed up 0.5 per cent at US$79.50 at the end of last week in New York as investors waited to see what the board would do.
That gap between the price offered and the level of Harrah’s shares widened at various points during the past two months as investor confidence that a deal would be reached has vacillated - partly due to concerns the casino licensing requirements could mean a gap of at least a year before the deal can be completed, experts say.
More uncertainty crept into the market last week as Harrah’s began considering the possibility that instead of a sale, it would undergo a recapitalisation, or financial restructuring, according to a source. Typically, that involves issuing new debt and then paying shareholders a special dividend.
- REUTERS
