Harrah's, Caesars may sell 4 casinos

Harrah's Entertainment Inc. and Caesars Entertainment Inc. may sell four casinos to a real estate investment firm to help win regulatory approval for their merger to create the world's largest gambling business.

Talks are being held with Colony Capital LLC for properties in Atlantic City, N.J., and riverboat casinos in Mississippi and Indiana, the two casino companies said in a statement. Closely held Colony Capital would pay $1.26 billion for the four casinos, the Wall Street Journal reported, more than analysts expected.

Harrah's planned acquisition of Caesars is the fourth major casino purchase this year as gaming revenue in Las Vegas, Atlantic City and other regions grows. The combined Harrah's and Caesars may have to sell other casinos in Nevada cities such as Reno and Laughlin to gain U.S. Federal Trade Commission approval, analysts said.

The potential sales price is "a sign of strength in the marketplace," said John Miller, an analyst with Chicago-based Ariel Capital, which owns 25 million shares of Caesars. "The cash flow that casino properties in general generate is significant."

The $1.26 billion price would value the properties at 8.5 times their 2005 earnings before interest, taxes, depreciation and amortization, said Susquehanna Financial Group analyst Eric Hausler in New York.

Los Angeles-based Colony would buy the Hilton in Atlantic City and Bally's Casino in Tunica, Miss., from Caesars. The firm would also purchase casinos in Tunica and East Chicago, Ill., from Harrah's, the statement said.

Harrah's spokesman Gary Thompson declined to comment on a sale price or whether the companies will sell more casinos to complete the acquisition.

Colony Capital, founded in 1991, has invested $10 billion in real estate, including hotels, the Fukouka baseball stadium complex in Japan and the Accor Casinos in France.

In June it bought the Las Vegas Hilton from Caesars for $280 million and said it will build on land adjacent to the resort. The company also owns the Resorts casino in Atlantic City, where it added a hotel tower earlier this year.

Thomas Barrack, the founder and head of Colony, was a principal with the investment firm of Texas billionaire Robert Bass. He also served for former President Ronald Reagan as deputy under secretary of the Department of the Interior.

Harrah's and Caesars combined would own 14 casinos in Nevada, six in Las Vegas, five of the 13 casinos in Atlantic City, four in Tunica and three in Indiana. Indiana law prohibits one company from owning more than two casinos, while Atlantic City restricts "undue economic concentration" by one owner.