07/16/2004 12:00AM

Two more behemoths join forces

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The high-stakes monopoly game in the casino industry continued this week, when Harrah's Entertainment agreed to buy Caesars Entertainment. The resulting merger creates the world's biggest gaming company, surpassing the recently formed company comprising MGM Mirage and Mandalay Resorts.

Harrah's had been frustrated for some time in its effort to gain a greater presence on the Strip. Negotiations between the companies were made public on Tuesday, and by Wednesday evening the boards at Harrah's and Caesars had agreed to the deal. Harrah's will buy Caesars for $9.4 billion, including assumption of over $4 billion in Caesars debt.

The combined company, if approved by regulators, government agencies, and shareholders of both companies, would have more than 50 casinos with more than 41,000 hotel rooms and employ almost 100,000. Harrah's agreed to pay about $17 per share of Caesars in a combination stock and cash transaction.

Reports in local newspapers confirmed that Harrah's and Caesars executives started serious discussions on the merger soon after the announcement of the MGM Mirage-Mandalay Resorts $7.9 billion deal. That marriage is still working its way through the long regulatory process and should be completed by the first quarter of next year.

When the buyout of Caesars is official, Harrah's will operate 28 casinos across 12 states. Harrah's will take over Caesars Palace on the Strip and other Caesars Entertainment properties in the Reno-Lake Tahoe area and Atlantic City. Harrah's already has its own casinos in those areas. Harrah's, which recently completed a buyout of Horseshoe Gaming for $1.45 billion, would eclipse the MGM Mirage-Mandalay company's annual revenues of $6.9 billion a year and cash flow of $2.1 billion yearly with revenues of $9.4 billion and cash flow of $2.3 billion yearly.

Gaming analysts knew that Harrah's Entertainment was searching for an acquisition of some magnitude and believe that Caesars Entertainment is a good fit for the company. Some analysts, however, also think that Harrah's may have to divest itself of some casinos because of antitrust concerns. The Federal Trade Commission looks at how many hotel rooms and slot machines a company controls in a single market in determining whether a company is too dominant.

Some industry observers also believe that having two major merger deals on the table will increase federal scrutiny.

While Harrah's and MGM Mirage sit poised to take another step toward cornering the competition, they may take note of what Steve Wynn said as he awaits the scheduled April opening of his newest $2.4 billion project, Wynn Las Vegas.

"Bigger ain't better," Wynn said. "Better is better."

Ralph Siraco is turf editor for the Las Vegas Sun and host of the Race Day Las Vegas radio show.