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Will Harrahs Be Drawn and Quartered By Buyers?

By Chuckmonster on Thursday, 7th December 2006 10:10pm
  » filed under Las Vegas  comments: 0


The Motley Fool has an interesting story about the possibility of Harrah's being drawn and quartered by the investment firm that is currently involved in takeover talks with the gaming behemoth.

This is a long-shot by far, but it surely is a possiblity - divesting and dividing Harrah's global properties may yield a quick gain for the private investment group. A Honda Civic is worth more on the market as parts quickly after it leaves the dealers lot. This could be interesting.

A couple of months ago, Harrah's received a $15 billion buyout offer from a pair of private equity firms. This past Spring's bidding war over Aztar and its 34 acres of prime real estate on the Las Vegas Strip may have sparked the private equity firms' interest in buying -- and selling off a chunk of Harrah's 350-acre site around the Strip may be the ultimate goal. And that would only be the beginning.

Last week, my colleague Emil Lee took a shot at breaking down the value of Wynn Resorts (Nasdaq: WYNN). I got to the part where Emil assigned a value of $5 to $10 million per acre for the 142 acres of land that a golf course adjacent to Wynn Las Vegas on the Strip sits on, when it hit me:

If you're hotel-casino icon Steve Wynn, that golf course is a necessary amenity -- an essential piece of the art. But this past Spring, Aztar's (NYSE: AZR) Tropicana, just a few miles down the Strip, went for as much as $35 million an acre in a bidding war, and Aztar got eventual "winner" Columbia Entertainment to pay full value for the rest of the company in the process. And so, if you are an investor, Wynn's golf course can be seen as nothing but a waste of space.

And then we get to Harrah's Entertainment (NYSE: HET), which, via a series of acquisitions, has amassed a site totaling 350 acres of land on or around the Las Vegas Strip. Of that, there's a stretch of land with over a mile of Strip frontage on the east side of Las Vegas Boulevard -- from Harrah's Las Vegas all the way down to Paris Las Vegas -- that is primed for a mammoth-scale redevelopment project. That area east of Center Strip amounts to about 184 acres.



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