Hail Harrah's: Caesars Talks Deal

Harrah's Entertainment is in talks to buy larger gambling rival Caesars Entertainment, a source familiar with the negotiations said, to leapfrog ahead of the proposed merger of MGM Mirage and Mandalay Resort Group as the biggest gambling company in the world.

The two Las Vegas-based companies could announce an agreement this week, the source said Tuesday, speaking on condition of anonymity.

"The likelihood is high," the source said Wednesday. "Things are moving along."

The companies began negotiating after MGM Mirage cemented a deal last month to buy Mandalay Resort Group for $4.8 billion in cash, the source said. That deal still has to be approved by federal and state gambling regulators.

Terms of the possible Harrah's-Caesars deal were not available; Caesars' market value stood at about $5 billion Wednesday; the company also has nearly that amount in debt.

Messages left with spokesmen for the companies were not immediately returned.

Harrah's, which is heavily into riverboat casinos, has 26 casinos in 13 states under the Harrah's and Showboat names — and has 41,000 employees.

Caesars, which changed its name in January from Park Place Entertainment Corp., currently is the largest casino operator in the world, but would be eclipsed by a Mirage-MGM Grand combination.

Caesars has 27 properties in five countries on four continents, including Caesars Palace and Bally's Las Vegas, and employs 54,000. The company led the industry with $4.17 billion in 2003 revenues. Mirage revenues totaled $3.91 billion, while Mandalay reported $2.49 billion. Harrah's had $4.13 billion in revenue last year.

Merrill Lynch gambling analyst David Anders said in an investor's note the deal makes sense because Harrah's wants to increase its presence on the Las Vegas Strip.

"Harrah's has made it clear that they were seeking to build a high-end property on the Las Vegas Strip by 2008," Anders wrote Tuesday. "This would obviously enable them to compete immediately."