Harrah’s Plans London Clubs Purchase

Sources are saying a subsidiary of Harrah’s Entertainment (NYSE:HET) is making a play to acquire all of the outstanding ordinary shares of London Clubs International plc for GBP1.25 per share, or approximately $530 million in the aggregate. The board of directors of London Clubs International has unanimously recommended that its shareholders accept the offer. If the offer is successful, Harrah's expects the transaction to close in the fourth quarter of 2006.

London Clubs International currently operates six casinos in the United Kingdom and has an additional five under development. London Clubs also operates two casinos in Egypt, one in South Africa and has a consulting relationship with a casino in Lebanon.

"London Clubs has a strong collection of properties that are well positioned in the United Kingdom's evolving regulatory framework. Under Harrah's ownership, these international properties will even be stronger in the future," said Gary Loveman, chairman, chief executive officer and president of Harrah's, in a statement issued today by the company. "The multi-national operational experience of LCI's management strengthens Harrah's existing team, allowing for continued international expansion."

The rumor mill had plenty of grist earlier this week when it was widely reported the company was looking to scoop up Stanley Leisure, Britain’s largest casino operator. The UK based company has 45 casinos and has also been negotiating with London Clubs in a deal reported to be upwards of US$1.2 billion.

"The British market is in the midst of a rapid expansion, and a British presence would serve as a good base for watching over Harrah's European growth projects, namely in Spain and Slovenia," Bear Stearns analyst Joe Greff wrote in a recent research report.
That expansion is part of a plan to roll out regional casinos, more commonly known as "super casinos." The Las Vegas style properties will begin to open in December of 2007 and will operate up to 1,250 slot machines with top jackpots of £1 million.

While the government originally expected to see as many as 40 new casinos built in reaction to a new gaming law enacted in 2005, controversy is scaling back the original plans. Now it looks as if there will be as few as 17.

Critics of the gaming plan in the UK are offering up the same concerns as those experienced on American shores. While the plan could help employ upwards of 100,000 people, people are worried it will significantly increase crime and the number of people addicted to gambling. Proponents say it will revive more destitute neighborhoods.

The competition for the gaming licenses is fierce as nearly 200 applications have been filed since the idea was originally floated. The first applications are set for approval early next year.

Even after the casinos start accepting action, their permanent place in Britain is not assured. The government is going to review the plan after three years and decide whether to make this experiment a permanent part of life in the UK.

The country currently has 140 very small casinos featuring just 10 slot machines with top jackpots of just £4,000. Additionally, people must be a member of the casino to gamble there. Under new rules they will get to double the number of slots they have.

Harrah's Entertainment, Inc. is the world's largest provider of branded casino gambling entertainment through operating subsidiaries such as Caesars, Horeshoe, Bally’s, Rio, Showboat, Grand Casinos, Flamingo and more. Harrah’s began in earnest 68 years ago in Reno, Nevada.