Las Vegas Sun

June 19, 2021

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Park Place to become world’s biggest gaming firm

Paris Las Vegas is the newest but far from the last jewel to be added to the crown of the gaming industry's heavyweight champion.

About two months from now, Park Place Entertainment will take control of 12 Caesars World casinos, widening its reach from the three biggest U.S. gaming markets, Australia and South America into Asia, South Africa and Canada, as well as the Seven Seas.

Analysts say the $3 billion acquisition will boost Park Place's revenue to $4.7 billion and its cash flow to about $1.2 billion next year, nearly half a billion dollars more than that estimated for its next-largest competitor, Harrah's Entertainment.

The Caesars purchase will also give Park Place what many believe is the best-known brand name in gaming, and could lead to yet another name change for a company that less than a year ago was part of Hilton Hotels Corp.

Since then, Hilton has become a pure lodging company, spinning off its casino operations last January into the new, publicly traded Park Place. At the same time, Park Place acquired three Grand Casinos Inc. gaming properties in what some consider the industry's most dynamic growth market -- Mississippi.

The Grand Casino deal gave new Park Place President Arthur Goldberg control of a company now boasting 17 casinos in Las Vegas, Reno, Laughlin, Atlantic City, Tunica, Gulfport and Biloxi, Miss., New Orleans, Uruguay and Australia.

And when the Caesars purchase closes later this year, the Park Place empire will boast 28 casinos with more than 2 million square feet of casino space, as well as 28,740 hotel rooms.

The company's Caesars, Bally's Park Place and Hilton hotel-casinos will constitute nearly 28 percent of the Atlantic City's total gaming space, just a notch below the footage controlled there by Donald Trump, as well as 3,193 hotel rooms.

In Las Vegas, Paris-Las Vegas, Bally's and the Flamingo Hilton sit near Caesars Palace, and the combined properties will give Park Place 18 percent of the hotel rooms and 15 percent of the casino space on the Strip, while the Las Vegas Hilton hotel-casino abuts the Las Vegas Convention Center on Paradise Road. All told, the company will have 14,778 hotel rooms in Las Vegas.

In Mississippi, the Grand Casinos in Tunica, Biloxi and Gulfport, plus the Bally's Saloon & Gambling Hall, offer 3,583 rooms and 400,000 square feet of casino space.

Park Place will own three casinos in Reno and Lake Tahoe once the Caesars deal closes, as well as Laughlin, Nev., and Indiana, Delaware and Louisiana operations. It will have a 50 percent stake in the company that operates a casino in Windsor, Ontario and interests in two Nova Scotia casinos, two Australian casinos, one in South Africa, another in Manila, one in Uruguay and two Caesars Palaces at Sea aboard the S.S. Crystal Harmony and S.S. Crystal Symphony.

The Caesars acquisition was especially sweet for Goldberg and Park Place Chairman Steve Bollenbach, who is also president of Hilton Hotels Corp. For most of 1997, the two were embroiled in a widely publicized battle with Barry Sternlicht's Starwood Hotels & Resorts for control of former Caesars World owner ITT Corp.

But Goldberg and Bollenbach balked at topping Sternlicht's $85-a-share offer for ITT, saying the price was too high. As 1998 progressed, gaming analysts and investors became convinced the duo was right, as Starwood's stock languished at depressed levels for most of the year.

Despite their disappointment over the ITT loss, Goldberg and Bollenbach believed the right acquisitions could fuel growth for Hilton's lodging and gaming segments. They discussed a possible merger with Circus Circus Enterprises -- now Mandalay Resort Group -- but couldn't come to terms.

When Hilton divested its gaming operations on the last day of 1998, Goldberg took operational control of a company with a strong balance sheet that could support his continued belief in consolidation. He'd overseen mergers before, and understood the challenges and opportunities they presented.

And Goldberg knew Sternlicht had grown increasingly disenchanted with the volatility of the Caesars gaming operations, which the Park Place chief had studied closely during the abortive Hilton bid for ITT.

Sternlicht, who'd been actively shopping the poorly performing Desert Inn ever since acquiring ITT, was by then courting bids for the Caesars casinos as well.

Goldberg's most dangerous competitor in the bidding for Caesars was Steve Wynn, the Mirage Resorts chairman who coveted Caesars World's flagship Caesars Palace. The world-renowned hotel-casino sits smack in the middle of a stretch along the west side of the Strip that includes Mirage resorts such as Treasure Island, the Mirage, Bellagio and its jointly owned Monte Carlo, as well as a valuable parcel of developable land occupied by the Boardwalk casino. Linking those properties would give Wynn's company more contiguous linear mileage along the Strip than Mandalay Resort Group, and those Mirage megaresorts could all be linked by a monorail that might deter customers from spilling over into competitors' casinos.

As the bidding progressed, Sternlicht learned Wynn didn't want all the Caesars properties in such far-flung places such as the Philippines and Canada. But the Mirage boss was willing to pay a premium for Caesars Palace, and made his final offer directly to Sternlicht on the final weekend of April this year. Wynn went to bed that night believing he had a deal.

Sternlicht, though, wanted to rid ITT of all its gaming properties and focus on the high-end lodging business. He also wanted to counter frequent criticism that he'd overpaid for ITT. The Starwood boss took Wynn's bid to Goldberg, who'd made a "final" offer of $2.9 billion for all the Caesars casinos, and squeezed another $100 million out of the Park Place president.

The result did little to quell the smoldering feud between the two casino moguls, a rivalry that had its genesis in Atlantic City. Goldberg and fellow New Jersey casino figure Donald Trump were irate that Wynn had convinced Atlantic City officials to provide Mirage with a site in the Marina District capable of housing at least three casino developments.

The Caesars deal gave Goldberg perhaps the world's best-known casino, sitting right in the middle of the Mirage resorts. And it gave him veto power over the planned monorail, which would pass behind Caesars along Industrial Road -- as long as it made a stop at Caesars.

"We'd look forward to working together on a monorail," he said, "but it has to make sense to Caesars. We're no longer a stepchild."

While most analysts expect Goldberg to concentrate on integrating Caesars World properties into Park Place, the company isn't going to stand still. Goldberg said he plans to continuing renovating Caesars Palace, perhaps adding another tower and expanding the Forum Shops retail area.

And additional takeovers are a distinct possibility. Park Place "is interested in expanding its business through the acquisition of quality gaming assets and selective new development," the company said in a recent filing with the Securities & Exchange Commission.

"It believes it is well-positioned to, and may from time to time, pursue additional strategic acquisitions, dispositions or alliances which it believes to be financial beneficial to the company and its long-term interests."

Park Place has acquired at least a third of Aladdin Gaming Holdings LLC's $221.5 million of senior discount notes in a possible first step toward assuming control of the property under construction next to Paris-Las Vegas.

If Aladdin Gaming is unable to complete construction and goes into bankruptcy, Park Place could negotiate to convert its debt holdings into a large equity stake in a restructured company. That could give Park Place control of four large casino resorts on one of the busiest stretches of the Strip.

On the other hand, if Aladdin succeeds with its new resort -- scheduled to open in the spring of 2000 -- Park Place will earn a high return on its investment.

It's also likely to earn a high return on its $800 million investment in Paris-Las Vegas. Some analysts predict it could generate cash flow of $150 million or more in the first year of operation, an 18.75 return. And they don't expect much cannibalization of the Bally's Las Vegas property next door, which shares convention and meeting space and parking facilities with Paris-Las Vegas.

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