Harrah’s cancels stock offering

Harrah’s Entertainment canceled its planned $610 million initial public offering Friday because the company priced its shares too high, analysts said.

In a statement, the Las Vegas-based casino operator blamed “market conditions” for its decision to terminate the stock sale. The company did not reveal any further details.

Harrah’s, which was taken private in January 2008 in a $29 billion private equity buyout, planned to sell 31.25 million shares of common stock at an estimated price range of $15 a share to $17 a share.

The stock would have traded under the name Caesars Entertainment Corp. under the symbol CZR on the Nasdaq Global Select Market.

Analysts said the stock sale would have listed 9.3 percent of the company.

Sources said there were two problems with the IPO: the price of the shares and Harrah’s balance sheet, which has more than $23 billion in long-term debt.

“The reason was entirely valuation,” one analyst told the Review-Journal on Friday. “Investors didn’t want to pay that much.”

An IPO analyst told Reuters that Harrah’s debt, one of the highest in the gaming industry, weighed heavily on potential investors. Harrah’s took steps this year to restructure a portion of its debt load by issuing new notes to pay off maturing debt.

“The debt structure of the company was a little too much for investors to handle,” said David Menlow, president of IPOfinancial.com, an independent research firm.

Menlow said investors also didn’t like that Harrah’s does not operate a casino in Macau, where gaming revenues increased more than 60 percent in the third quarter. Results from Macau have boosted the prospects of Las Vegas Sands Corp. and Wynn Resorts Ltd., which have large holdings in the Chinese gambling market, and to some extent, MGM Resorts International, which owns 50 percent of the MGM Grand Macau.

Subsidiaries of Las Vegas Sands and Wynn Resorts launched successful IPOs on the Hong Kong Stock Exchange and MGM Resorts is expected to list shares on the market by year’s end.

Harrah’s purchased a golf course in Macau in 2007 on hopes the government would issue new gaming concessions. But Macau leaders have shown little movement toward expanding its gambling market.

“Macau is a bright spot for the industry and Singapore is off-the-charts robust, but it doesn’t do Harrah’s any good,” Eugene Martin Christiansen of consulting firm Christiansen Capital Advisors told The Associated Press.

Harrah’s decided late Thursday night to cancel the stock offering, but sources said the IPO could still be brought back to the market before the end of the year.

The move by Harrah’s came a day after automaker General Motors went forward with a $20.1 billion IPO, the second-largest in U.S. history. GM’s sale of nearly 16 billion shares was priced higher than expected and was oversubscribed.

Harrah’s planned to use money from the IPO on two casino development projects in Ohio and to complete an unfinished 660-room hotel tower at Caesars Palace. Harrah’s also recently became involved in an effort to save a troubled casino project in Philadelphia.

A source said New York hedge fund Paulson & Co., which injected cash into Harrah’s in June in exchange for almost 10 percent equity, is still proceeding with plans to sell its 30.24 million-share stake. There was no mention of the Paulson plans in Harrah’s announcement and a Paulson spokesman couldn’t be reached.

In a filing last month with the Securities and Exchange Commission, Harrah’s said its two private-equity owners, Leon Black’s Apollo Management LP and David Bonderman’s TPG Inc., would retain their controlling interests in the company if the company goes public again.

Revenues for Harrah’s have fallen from a peak of $10.8 billion in 2007 to $8.9 billion last year, an 18 percent decline. In third quarter that ended Sept. 30, Harrah’s said its net loss shrank to $164.8 million from a loss of $1.62 billion a year earlier.

Harrah’s operates 10 Strip casinos, including Caesars Palace, Bally’s, Paris Las Vegas, Planet Hollywood Resort and Harrah’s, along with the off-Strip Rio. The company is considered the world’s largest casino operator with 53 properties in six countries. Harrah’s also owns the World Series of Poker.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.