Wednesday, July 16, 2003
Copyright © Las Vegas Review-Journal

THE STRIP: Park Place to take Caesars name

Analysts unsure new name marks significant change for company

Park Place CEO Wally Barr, center, poses Tuesday at Caesars Palace at a press conference heralding Park Place Entertainment's decision to change its name to Caesars Entertainment. Photo by John Gurzinski.

Park Place Entertainment Corp. announced Tuesday plans to rename the company Caesars Entertainment in an effort to leverage one of the best-known names in gaming.

But Wall Street analysts were skeptical, saying little will change at the company just because of a name change.

Joe Greff, gaming analyst at Fulcrum Global Partners, an independent Wall Street investment research firm, said the name change "is not as significant as a change in the return on invested capital. That's (Park Place's real) challenge," he said.

Park Place revenues were $4.6 billion in 2001 and are projected by Wall Street analysts to remain flat at that level through 2004. Similarly, cash flow, generally defined as generally defined as earnings before interest taxes, depreciation and amortization, was $1.1 billion in 2001 and analysts have projected zero growth through 2004.

One analyst asking not to be named said the change is about as significant as replacing "Search Park Place Entertainment" with "Search Caesars Entertainment" on the Internet. The name change was not unexpected and is a step in the right direction. But turning Park Place Entertainment around is a long-term proposition, Greff said.

Goldman Sachs analyst Steve Kent said, "You cannot transform a company without a series of steps and this is one of many steps they are taking to improve their earnings potential."

Analysts have said revenue growth and improved profitability are both essential to the long-term success of the newly renamed company.

"Can you remember the last time you walked into Caesars Palace and there wasn't construction around. (The name change) is part of a long-term proposition that has the potential to be positive, but we're adopting a wait and see position," Greff said.

Deutsche Bank analyst Marc Falcone said leveraging the Caesars name makes sense, but the name change also raises as many questions.

"How do the other brands get folded under the Caesars brand? Park Place just rolled out its Connection Card with individual property identities. How do they fold all that together? And what's the cost of changing the company name to Caesars (compared with potential revenues)?" he said.

Park Place Chief Financial Officer Harry Hagerty said the name change is significant because 44 percent of respondents in unprompted survey research volunteered "Caesars" as the best name in gaming.

"Caesars used to be one of the best-known names in gaming. Cynics ask if it still is, and (our research shows) the answer is yes," Hagerty said.

He estimated the name change would cost between $1 million and $2 million.

Separately, Hagerty said a new tower at Caesars Palace in Las Vegas is "in the final stages of design and cost analysis" with a target completion date in 2005.

The much anticipated new tower, previously discussed in a conference call with Wall Street analysts, is expected to cost $350 million and add 1,000 rooms to the Caesars site on the Strip which now has about 2,400 rooms in four towers.

With projects such as that and the name change, Hagerty said "we're fully convinced Caesars can be restored to its former glory."

Previous plans for a $450 million, 900-suite tower were dropped following the terrorist attacks on Sept. 11, 2001.

Park Place Chief Executive Officer Wally Barr said in the short run the name change will not apply to individual properties which will keep their operating names. He said there will be no change in the Connections Card. The masthead logo will be changed to Caesars Entertainment but the identification of the individual properties will remain unchanged.

Both Barr and Hagerty said the name change will help the company negotiate expansion opportunities overseas, especially in the United Kingdom where both Harrah's Entertainment and MGM Mirage recently have completed joint development agreements.

Harrah's Entertainment this month signed a deal with London-based Gala Group expect to develop at least eight new casinos and MGM Mirage in May finalized a deal to buy a 25 percent share of Metro Casinos Ltd., which is developing a casino in Bristol that is due to open by year's end.

If approved by shareholders in September, the Park Place change would become effective in January.

The company plans to continue trading on the New York Stock Exchange and has reserved a new ticker symbol, CZR, for use after the name change becomes effective.

Park Place shares fell 15 cents, or 1.68 percent, to close at $8.80.