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Park Place Buys Caesars Casinos
By writer_name  Associated Press
LOS ANGELES — Park Place Entertainment Corp., the world's largest casino resort company, just got bigger, announcing Tuesday it would buy Caesars World Inc. — one of the best-known names in gaming — for $3 billion.


Jeff Scheid/AP
Park Place Entertainment Corp. purchased Caesars World from Starwood Hotel and Resorts for $3 billion

Starwood Hotels & Resorts Worldwide, Inc. said it was selling the famed Caesars hotels and casinos in Las Vegas, Atlantic City, N.J., Lake Tahoe, Nev., and other cities around the world, to Park Place, the casino-hotel company spun off by Hilton Hotels Corp. last year.

The deal positions Park Place as "far and away the world's largest gaming operator," said Adam Brecht, a spokesman for the hotel consulting firm PricewaterhouseCoopers. "Park Place gets a mighty, mighty brand and virtually corners the rapidly expanding Las Vegas gaming market," he said.

Sources have said Park Place might consider changing its name to Caesars, which carries worldwide clout.

The $3-billion price tag signifies a solid rebound for the casino sector, analysts said, after a three-year malaise in which stocks were undervalued by Wall Street.

The deal seems to support other recent positive indicators such as an increase in visitors to Las Vegas, higher gambling and entertainment sales and the best first quarter the sector has seen in years, they said.

The deal also gives Park Place control over a significant site in the center of the Las Vegas Strip, and expands its holdings on the Atlantic City boardwalk where Caesar's has the prime spot, PricewaterhouseCoopers analyst Warren Marr said.

Park Place also gains a place in the growing U.S. riverboat market with the Glory of Rome riverboat in Harrison County, Ind., and along the Gulf Coast with a Sheraton Casino & Hotel in Tunica, Miss.

Park Place Chief Executive Arthur Goldberg said the company expected the deal to add to earnings in the first year after it is completed.

"By acquiring the Caesars' brand name and related customer database, we plan to heavily cross market between our destination resorts. This will boost revenues and expand the markets where we operate," Goldberg said.

Starwood Chairman Barry Sternlicht said his company would now focus on its hotel operations, describing the casino business as volatile and needing major capital investment to be competitive. He said Starwood would use the proceeds to pay down debt, which in turn should lower its borrowing costs.

Analysts said the deal should boost Starwood stock.

"The investor in a lodging stocks is not necessarily the same profile investor who would invest in gaming stocks," Marr said. "That's one of the reasons Hilton looked at its spinoff of Park Place and it will allow Starwood to be singularly focused and I think that will be received well in the investment community."

After the deal, analysts at BancBoston Robertson Stephens upgraded Starwood to a buy rating from market performer.

"We are raising our rating on Starwood ... with a 12-month price target of $44. ...," BancBoston analyst Harry Curtis said.

The deal ends almost two years of corporate tug-of-war between the two industry giants.

Park Place is a spin-off of the hotel/casinos of Hilton Hotels, which battled Starwood during much of 1997 for the Caesars and Sheraton hotels from previous owner ITT Corp. Tuesday's deal for Caesars had been rumored for months.

With the deal, Goldberg said that Park Place also picks up "strategically located, undeveloped land parcels in Atlantic City and Las Vegas that can be used for future development."

Analysts have said that Park Place, with its relatively low deb, is one of the most powerful companies in the gambling sector and well positioned to build if it so chooses.

Park Place did not buy Starwood's Desert Inn which with some 35 acres of developable land is one of the few properties left that could be built into an entirely new resort on the Las Vegas Strip.

Starwood spokesman Jim Gallagher said Starwood was still trying to sell the boutique hotel and casino and hopes to have it sold within a few months. "We still are conducting conversations and hope we're in position to announce disposal in not too distant future," he said.

One hesitation in buying the Desert Inn is that it attracts high rollers and actually competes with Caesar's, he said.

Mirage Resorts Inc. was said to have been in talks at various times with Starwood, sources said. Buying Caesar's would have given Chairman Steve Wynn extra foot traffic to the ultra-posh Bellagio resort, which he opened six months ago just next door on the Strip. But Wynn was best not to make the acquisition at this time, the sources said.

Before making more acquisitions, Mirage might want to look at full-year companywide results to make sure that Bellagio's stellar results did not hurt the other properties, they said.

Shares of Park Place jumped $2.125 to $11.25 on the New York Stock Exchange, rising $1.625 to $10.75. Starwood fell 56 cents to $34.44.

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