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