Harrah's To Purchase Harveys

By LISA SNEDEKER
.c The Associated Press

LAS VEGAS (AP) - Harrah's Entertainment Inc., one of the world's largest gaming companies, announced Tuesday it plans to acquire Harveys Casino Resorts for $625 million to expand its customer base.

In addition to broadening its market share in northern Nevada, Harrah's would gain two casinos in Council Bluffs, Iowa, and one in Central City, Colo., new markets for the Las Vegas-based gaming operator.

``It's a good fit strategically,'' said Phil Satre, chairman and chief executive of Harrah's, during a Tuesday conference call to investors and analysts.

The purchase price includes assumed debt of $50 million. Harrah's said it will take on additional debt to finance the cash deal.

Harrah's executives expect the transaction to close by August, pending regulatory approvals.

While Harrah's is licensed in Nevada and has had a gaming license in Colorado, it must now obtain an Iowa license.

Once the deal is complete, Harrah's would have 25 casinos in 12 states, including two Reno casinos and three Lake Tahoe resorts. It currently operates 21 casinos in 17 markets under the Harrah's, Rio and Showboat brand names.

Harveys, a privately held company based in Lake Tahoe, is controlled by Colony Capital LLC of Los Angeles.

``We expect that an industry leader like Harrah's is better positioned to take the company to the next level,'' said Jonathan Grunzweig, Colony principal.

The proposed sale doesn't mean Colony is done gambling on the industry, however.

Harrah's is not assuming Colony's agreement to purchase Resorts Casino Hotel in Atlantic City, which Colony is acquiring from Sun International for $140 million.

The Harrah's acquisition announcement comes three months after Harveys' deal to acquire Pinnacle Entertainment Inc. of California fell through. Harveys was to have paid $1.3 billion for Pinnacle, an operator of casinos in Mississippi, Louisiana, Indiana and Nevada, but that deal fell through after Harveys had difficulty finding financing to complete the transaction.

Harveys recorded $110 million in cash flow over the 12 months ending Feb. 28, 2001, Harrah's said.

News of the acquisition came shortly after the stock market closed Tuesday.

Wall Street analysts have expressed concerns about the effect rising energy costs and the expansion of tribal gaming in California would have on northern Nevada resorts.

AP-NY-04-24-01 2059EDT