Caesars Entertainment Corp. Monday said it will sell its Harrah’s St. Louis hotel-casino to regional rival Penn National Gaming for $610 million, leading one analyst to speculate if the transaction would kick-off sales of other properties.
In separate statements, Las Vegas-based Caesars and Penn National – which owns M Resort in Las Vegas – gave differing reasons for the all-cash transaction, which could close later this year.
Caesars Entertainment Chairman Gary Loveman said the company continues to look at other growth markets. Caesars is opening the Horseshoe Casino Cleveland next Monday and Horseshoe Casino Cincinnati next year. The company is exploring gaming expansion opportunities in Boston, Baltimore and Toronto.
“The sale of this property exemplifies our strategy to maximize returns from our mix of assets through investments in new markets as well as occasional divestitures,” Loveman said.
Penn National Chairman Peter Carlino said the Harrah’s St. Louis would be rebranded under the company’s Hollywood label. The acquisition will give Penn its second casino in Missouri although the company operates them in nearby Alton, Ill., and Kansas City, Kan.
Penn National is opening the Hollywood Casino Toledo in Ohio later this month and the Hollywood Casino Columbus later this year.
“We believe the addition of Harrah’s St. Louis highlights our commitment to build shareholder value through return-focused capital deployment and complements our existing development pipeline,” Carlino said. “We continue to evaluate other domestic regional gaming opportunities where we can leverage our balance sheet and proven operating disciplines.”
David G. Schwartz, director of the Center for Gaming Research at the University of Nevada, Las Vegas, said the transaction makes sense for both companies; Penn National has the liquidity to buy properties while Caesars has assets for sale. “Gaming is so specialized, so there is a smaller pool of buyers,” Schwartz said. “You could see Penn looking into other markets.”
Over the past two years, analysts had anticipated some sort of transaction between Penn and Caesars, but not for Harrah’s St. Louis. Many speculated that Penn wanted to acquire the off-Strip Rio from Caesars, but wasn’t willing to meet the asking price.
Caesars is spending $550 million to build the Project Linq retail, dining and entertainment complex on the Strip, but the company has already financed the development. Schwartz said Caesars could use the proceeds from the Harrah’s St. Louis sale to pay down its long-term corporate debt, which is hovering near $20 billion. “Paying down debt is always a good thing,” he said.
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