Harrah's: The Other Shoe Drops
The big $27.8 billion deal for the buyout of Harrah's is happening. But what a difference a day makes. Yesterday, Harrah's CEO Gary Loveman was saying that the company would not be changing its priorities: "We will have owners who share our vision for Harrah's, are fully supportive of our current strategy and are committed to helping us execute on it. This will be a change in ownership, not a change in direction." Today, however, Review-Journal is reporting that Loveman was telling Harrah's personnel in a presentation that the company's priority will now be to pay down the debt taken on in the aquisition "instead of reinvesting in growth." Workforce reductions, also not mentioned in yesterday's coverage (which did mention that key Harrah's executives will be staying in place), seem to be in the plans now, too.
This is troubling locally as massive reinvestment and growth is what fuels success in Las Vegas. Specifically, this sounds like bad news for the supercasino widely supposed to have been in Harrah's immediate plans for the massive amount of contiguous Strip acreage the gaming giant has assembled that includes Flamingo, Imperial Palace and Harrah's.
I am not a business expert, but wasn't the entire point of going private yesterday to allow reinvestment tomorrow without Wall Street pressures? But don't take my word for it; in yesterday's Review-Journal, Joseph Weinert, a spokesman for gaming industry consultant Spectrum Gaming is quoted telling CBS MarketWatch:
"The key statement is Gary Loveman saying that the new owners want to continue down the path previously laid out by management. This indicates that Harrah's will proceed with its major expansions planned for Las Vegas and Atlantic City. I also detect a bit of relief in that Harrah's can pursue its vision without having to worry about the quarter-to-quarter mind set of Wall Street."
A day later that vision seems to be getting corrective lenses.
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