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Board backs buyout of Harrah's

6 Dec 2007

by Arnold. M. Knightly

LAS VEGAS, Nevada -- The Gaming Control Board on Wednesday recommended approval of Harrah's Entertainment's $17.1 billion buyout after receiving assurances that the deal will not change how the company operates.

"As we've told our employees, this is a change in ownership but not a change in direction," Harrah's Chairman and CEO Gary Loveman told the regulators during the hearing in Carson City.

David Bonderman, a founding partner at TPG Capital, one of the private equity companies that is buying the gaming giant, agreed that Harrah's will continue to be directed by the management team that is already in place and will continue to grow through capital investments.

"You will see the same management team and the same properties," he said. "We certainly think (Nevadans should favor the deal.)"

TPG Capital is partnering with Apollo Management to take the world's largest gaming company private in a deal that will total $31.3 billion, including assumed debt.

Board members asked few questions during the two-hour meeting other than about financing for the buyout.

Loveman, however, addressed an issue during the hearing that the board didn't broach: recently uncovered problems with improperly permitted and inspected room renovations at two of the company's hotel-casinos.

Harrah's was forced to close about 700 rooms at two Las Vegas properties after questions were raised about whether renovations at the Rio and Harrah's Las Vegas were done properly.

Harrah's was also recently named in three complaints filed by Clark County with the Nevada State Contractors Board alleging the company performed construction work without permits at the two properties and a warehouse building on Twain Avenue.

"I want to assure you this is an issue we take very seriously," Loveman told the regulators during his opening statement. "It is one I take very seriously and I believe we've taken the appropriate steps to remediate what has been a deficiency in the compliance that we have in respect to making sure these projects were done appropriately."

Board Chairman Dennis Neilander said after the hearing that the board did not ask about the problems and continuing investigations by the county and the gaming company because Clark County officials have primary jurisdiction on the issue since it involves building code violations.

"We don't have jurisdiction over building codes so we're going to wait and see what comes out of the investigations," he said. "Once they finish their review we'll take a look at that."

Neilander said Harrah's contacted regulators immediately after the problems came to light and have kept the board informed of its plans to correct the situation.

Loveman also defended his company's record on minority hiring and philanthropy, noting during his statements that the company gives nearly $1.5 million per week to various causes.

Community activists Stanley Washington and Gene Collins traveled to Carson City for Wednesday's hearing to complain about Harrah's efforts to assist the minority community in west Las Vegas.

The activists were told that they would have to wait until today to speak during the public comment period.

Washington, however, said he thought he accomplished his objective Wednesday by speaking with Leon Black, founding partner at Apollo Management, and Bonderman, during breaks in the hearings.

"They are giving us an opportunity to meet with them and work on our particular issues. From looking at this crowd, the only ones to participate (in gaming) are people of noncolor."

Washington said there is an untapped "urban market" out there and a black-oriented casino could attract 4 million to 6 million more people a year to Las Vegas.

"There is a humongous market for that," he said. "It is incumbent on us to make it happen."

Neilander said Stanley and Collins were not able to speak during Wednesday's hearing because "that would not be fair to the applicants. The way we handle that is if anyone has concerns we make sure they get it to the staff ahead of time."

The Gaming Commission will meet Dec. 20 to consider final approval of the buyout deal.

The purchase has already been approved by shareholders and most other jurisdictions where Harrah's operates casinos. Company officials still expect to complete the deal by year's end.

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