For the past 14 years Nevada has been the fastest growing state in the nation. Experiencing a healthy and robust economy, a number of start-up firms have subsequently migrated toward Nevada’s promise of wealth, hoping to take advantage of the state’s many tax benefits and opportunities. Naturally, as more firms make their way into the state, competition for consumer dollars tightens. With an increase in competition come new and innovative ideas on how to beat out rival firms. While some companies have folded or sold out, others have expanded and formed strategic alliances. Inevitably, as the Nevada marketplace has grown and matured, a number of mergers and acquisitions have occurred. The following are 10 of the largest.
Starwood Hotels & Resorts Worldwide Inc. of White Plains, N.Y. sold Caesars World Inc. to Las Vegas-based Park Place Entertainment Corp. for $3 billion cash in a transaction completed December 30, 1999. Starwood originally acquired the Caesars casinos and Desert Inn as part of its $10.2 billion purchase of ITT Corp. in 1998. Park Place owns Bally’s Park Place Casino Hotel and the Atlantic City Hilton; Caesars World owned Caesars Atlantic City Hotel Casino, Caesars Palace in Las Vegas and properties elsewhere in Nevada and Indiana. The purchase of Caesars World, which includes all of the Caesars casino operations, makes Park Place one of the world’s largest gambling casino operators. Spokespeople from Starwood said the company would use the proceeds to repay some $2.5 billion in debt and pay down its bank revolving credit line. The agreement also called for certain adjustments that could have boosted the final price above $3 billion. Starwood officials said they will continue sell off $500 million in assets.
Nevada Power Company of Las Vegas and Sierra Pacific Power Company of Reno, the two largest utility providers in the state, merged on July 28, 1999. The agreement called for a merger of equal parts creating a company with a total market capitalization of $4 billion ($2.3 billion in equity; $1.5 billion in debt; $240 million in preferred stock). The combined entity, Sierra Pacific Resources, serves 800,000 electric, 10,000 gas and 65,000 water customers across Nevada and Lake Tahoe. Ultimately, the deal makes Sierra Pacific Resources the eighth largest utility provider in the West. Under the merger agreement, $304.6 million in cash was paid to Nevada Power stockholders and
$151.6 million in cash was prepaid to Sierra Pacific stockholders. The headquarters of the holding company remains in Reno, while the utility subsidiaries — Sierra Pacific Power Company and Nevada Power Company — are in Las Vegas, with gas and water operations in Reno.
Four months after Sierra Pacific Power Company and Nevada Power Company merged to create Sierra Pacific Resources Inc., the firm purchased Portland General Electric (POE) from the Enron Corporation of Houston, Texas for $3.1 billion. The deal came amidst ongoing preparations to deregulate Nevada’s electric utility industry. POE serves more than 700,000 customers in northwest Oregon. The merger made Sierra Pacific Resources one of the largest utilities on the West Coast, with more than 1.7 million customers in Reno, Las Vegas, Lake Tahoe and northwest Oregon. Sierra Pacific Resources plans to become a wire company that provides access to its transmission and distribution lines to competitors. It agreed to sell the utilities’ power plants in obtaining merger approval from the Nevada Public Utilities Commission.
Harrah’s Entertainment Inc of Memphis, Tenn. merged with Rio Hotel & Casino of Las Vegas. The merger, completed on January 4, 1999, gives Harrah’s 19 casinos in the U.S. The company acquired the Rio in a tax-free, one-for-one stock swap valued at $525 million and assumed Rio’s $303 million of debt. In addition to the Harrah’s, Rio and Showboat brands domestically, Harrah’s operates the Star City Casino in Sydney, Australia. Following the Rio deal, Harrah’s decided to move its corporate headquarters to Las Vegas, and signed a 15-year, $50 million lease for 120,000 square feet of office space at McCarran Center. Harrah’s is expected to move into its new four-story building when construction is completed by late summer 2000.
MGM Grand Inc. of Las Vegas merged with Primadonna Resorts Inc. of Las Vegas. The deal gave MGM Grand control of the New York-New York Hotel/Casino in Las Vegas plus Whiskey Pete’s, Buffalo Bill’s and the Primm Valley Resort in Primm, along with two championship golf courses. Under the agreement, Primadonna’s stockholders will receive 0.33 shares of MGM common stock for each share of Primadonna held, or a total of some 9.5 million shares of MGM stock. The stock assumption deal is valued at $605 million. MGM Grand operates the MGM Grand Hotel-Casino in Las Vegas, a casino in Australia and is developing a temporary casino in Detroit. The two companies partnered in 1995 to build New York-New York, across the Las Vegas Strip from the MGM Grand. Both had an agreement that either company had first right of refusal to buy out the other’s 50 percent interest in the resort.
Republic Industries Inc.of Fort Lauderdale, Fl. paid $378 million to merge with Silver State Disposal Services Inc., of Las Vegas. Republic is North America’s fourth largest waste company, with waste facilities in 25 states and Canada. The firm is led by entrepreneur Wayne Huizenga, one of the founding partners of Waste Technologies Inc., now the nation’s largest waste company. Huizenga is also known for changing Blockbuster Entertainment from a 19-store company into the nation’s largest video store chain. The Silver State acquisition, announced on July 29, 1997, is one of Republic Industries’ five largest in the waste industry and contributes $120 million to the company’s $2.4 billion in yearly revenues. It also solidifies the company’s competitive edge in the southwest — Republic Industries already has waste companies in California, Arizona and Texas.
MGM GRAND & MIRAGE
Ship Giants Agree to Merger
Two of the most admired assets in the gaming industry managed to see eye-to-eye following MGM Grand’s second offer to purchase all of Mirage Resorts’ outstanding shares. Mirage Resorts officials spurned MGM Grand’s initial $17 per share offer, but hinted a mote lucrative deal would receive greater consideration. The outcome is a definitive merger agreement under which MGM Grand will acquire Mirage Resorts’ outstanding shares at $21 per share in cash. The transaction will have a total equity value of about $4.4 billion; MGM Grand will also assume Mirage Resorts’ outstanding debt of approximately $2 billion. The companies say they anticipate completing the merger during the fourth quarter of this year. Noted J. Terrerice Lanni, MGM Grand chair, “As a result of this acquisition, MGM Grand will have achieved a dream combination of assets and people, a combination that creates unquestionably the premier company in the gaming industry. This transaction provides Mirage shareholders with a significant premium for their shares. We strongly believe that the revenue enhancements and cost reduction opportunities arising out of this acquisition will create a meaningful increase in the value of MGM Grand stock.”
Colony Capital, Inc. of Los Angeles, Calif. completed a $420 million merger with Harvey’s Casino Resorts Inc. of Lake Tahoe on February 2, 1999. Colony is an investment fund capitalized with money from some of the nation’s largest pension and retirement funds. After acquiring Harvey’s, Colony owns 97 percent of both Harvey’s class A voting and class B nonvoting stock. The existing management of Harvey’s owns the remaining 3 percent of each class of stock. Harvey’s owns casinos in Lake Tahoe; Council Bluffs, Iowa; and Central City, Cob. Harvey’s management will continue running Harvey’s after the Colony acquisition.
Zions Bancorpotatlon of Salt Lake City, Utah, owner of Nevada State Bank, purchased Pioneer Bancorporation of Reno, owner of Pioneer Citizens Bank, in a 1999 stock deal valued at about $340.8 million. The deal makes Nevada State Bank the third largest in Nevada behind Bank of America and Wells Fargo banks. The merger agreement calls for each share of Pioneer to be converted into a fraction of a share of Zions at a price of $35.70 per Pioneer share, based upon Zions’ average stock price over a period near closing in the third quarter.
Vencot Inc. of Louisville, Kentucky purchased Las Vegas-based Transitional Hospitals Corporation for $640.2 million in August 1997. Both Vencor and Transitional operate long-term care facilities for former hospital patients. Transitional has 16 hospitals in 13 states and owns a 61 percent interest in Behavioral Healthcare Corporation of Nashville, Tenn. Combined, Vencor and Transitional hold 57 hospitals, 314 nursing centers, 4,000 institutional customers for contract rehabilitation services, 80,000 employees and annual revenue of about $3.3 billion.
International Game Technology (lGT) of Reno acquired Sodak Gaming, Inc., of Rapid City, S.D. on September 1, 1999. IGT acquired Sodak, a distributor of casino gaming products and software systems, for $10 per share in cash, totaling approximately $230 million. The purchase was financed using a portion of the proceeds received from the earlier sale by LOT of $1 billion of senior notes. Sodak is expected to sell its Miss Marquette Iowa riverboat casino and associated real property and assets to Lady Luck Gaming Corporation. Sodak will operate as an independent subsidiary of lGT and remain headquartered in Rapid City. Following the merger, Roland Genmer will serve as president and CEO of Sodak for at least one year. In early 1997, Genmer instituted a major restructuring of Sodak, shifting its focus to the profitable Indian distribution business and trimming corporate overhead.