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Harrah's bets on Rio
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August 10, 1998: 11:53 a.m. ET
Casino to buy competitor in $518M stock deal, create $2.9B concern
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NEW YORK (CNNfn) - Harrah's Entertainment Inc., a leading national casino company, is acquiring Rio Hotel & Casino for $518 million.
The merger of Las Vegas-based Rio with the the Memphis-based Harrah's will create a $2.9 billion gambling powerhouse.
Harrah's Monday signed the definitive merger agreement to acquire all Rio shares in a one-for-one stock swap and to assume all of Rio's debt, estimated at about $300 million.
The boards of directors of both companies have approved the transaction.
According to the company, the Rio hotel and casino will operate as a separate subsidiary of Harrah's and no changes are expected to its operation.
"We think this is a perfect fit," said Harrah's Chairman and Chief Executive Phil Satre. "We are bringing together the nation's number one national casino company and the number one flagship resort in Las Vegas, the Rio."
He added the merger is expected to create more "cross-play" between customers at the two casinos in Las Vegas.
"We will keep Rio as it is but build upon the revenues there and at other Harrah's properties," he said.
Harrah's expects the merger, accounted for as a pooling of interests, to add to earnings in the first year.
Anthony A. Marnell II, chairman and chief executive officer of Rio, will become vice chairman of Harrah's and a member of Harrah's board of directors.
Along with James A. Barrett, Jr., president of Rio, Marnell will continue his executive responsibilities at Rio.
The transaction, which is subject to regulatory approvals, is expected to close by the end of the year.
Under terms of the deal, each Rio share will be traded for one share of Harrah's stock.
Rio, through its wholly-owned subsidiary, owns and operates the Rio Suite Hotel & Casino.
The company operates 2,500 suites and 120,000 square feet of gaming space, including 2,400 slot machines and 100 table games.
Harrah's, with 19 properties worldwide, is the most geographically diverse casino company in North America.
Last month, Harrah's and Rio Hotel & Casinos teamed up to help bankroll the creation of a new airline, National, intended to increase tourist traffic to Las Vegas.
Both companies agreed to invest $15 million in the carrier, to be headed by former America West Chief Executive Mike Conway. It will provide long-haul service to Las Vegas for leisure travelers from most major cities along the East Coast.
The airline has secured $50 million in start-up capital and will operate Boeing 757's.
Harrah's (HET) stock closed Friday at 20-1/8, up 1/16 on the New York Stock Exchange.
Shares of Rio Hotel & Casino (RHC) closed up 1-7/8 at 18-7/8 on the Big Board.
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