Updated on 09/16/2011 9:07AM

Harrah's to buy Louisiana Downs

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Harrah's Entertainment, which operates 26 casino properties around the country, has signed a letter of intent to purchase a controlling interest in Louisiana Downs in Bossier City, La. The purchase price of the track, which has a license to install slot machines, is $73 million.

Another $84 million in improvements are planned, bringing the project's total cost to $157 million.

Harrah's will partner with a group of five businessmen, led by Shreveport attorney Jim Davis, who last year entered into an agreement to purchase Louisiana Downs from current owner John York. The new deal will eventually give Davis's group, the Downs Entertainment Group, a small stake in both Louisiana Downs and an existing Shreveport casino owned by Harrah's.

Davis said Harrah's will own 80 percent of Louisiana Downs, with the Downs Entertainment Group owning the remaining 20 percent. Eventually, the two groups will merge into a new company that will own both Louisiana Downs and the Harrah's Shreveport Hotel and Casino. Harrah's will own 95 percent of the new company, and Davis's group 5 percent. Both facilities will be managed by Harrah's.

Davis's group, which has so far invested about $2.5 million in the purchase of Louisiana Downs, approached Harrah's about a partnership in June.

"We spoke to many different groups, both gaming entities and racing entities, about a proposed venture, and they were very receptive to the idea of Louisiana Downs," said Davis. "They have made a substantial investment in the Shreveport market. This was an opportunity to grow their investment that was attractive to them. We reached an agreement in July."

The deal is subject to regulatory approvals from the Louisiana Gaming Control Board and the Louisiana Racing Commission. This will be the first time Harrah's, which owns part of Turfway Park in Florence, Ky., will manage a racetrack. Slots could begin operations at Louisiana Downs as early as summer 2003.

Harrah's will be the third gaming company to enter the racing business in Louisiana. Boyd Gaming purchased Delta Downs, a small track in Vinton, for $130 million and opened a slot casino there in March. Peninsula Gaming owns 50 percent of Evangeline Downs in Lafayette.

The potential of gaming revenues significantly increased the value of Delta, and this year alone, the possibility of slots at Louisiana tracks has prompted three different groups to make inquiries about opening racetracks in Louisiana. Earlier this month, the Louisiana Racing Commission announced it would not process any more new racetrack applications for at least a year, and during that time will conduct an economic impact study as supported by the Louisiana Legislature.

The moratorium would seem to make Louisiana Downs, which opened in 1974, all the more valuable. When its casino opens, Louisiana Downs will be the only land-based casino to offer slot machines in northern Louisiana.

Since Davis began negotiations to buy Louisiana Downs, he has stressed that his group's goal is to use casino revenues to improve the quality of racing at Louisiana Downs. To that end he entered into an agreement with York this meet to increase purses 50 percent to $200,000 a day, with a projected purse overpayment of approximately $2.5 million. The overpayment was to be recouped after the slots casino at Louisiana Downs opened. Both attendance and handle at the current meet are up from comparative figures in 2001.

Anthony Sanfilippo, president of Harrah's Central Division, said he would like to see Harrah's existing Shreveport casino and Louisiana Downs work together to build each other's business.

"The first thing that we want to do is really understand what's worked at other successful tracks in the U.S. and see how we can continue to help improve the facilities at Louisiana Downs," he said.

Sanfilippo said Ray Tromba, vice president and general manager of Louisiana Downs, will be brought on board by Harrah's to oversee racing operations at the track. The deal is expected to close by the end of 2002.