Sunday, October 15, 2006

Jackpot, Part Deux!

According to press reports shareholders of Harrah's Entertainment Inc. (NYSE: HET) have filed a class action lawsuit alleging that the proposed $15.1 billion takeover by two private equity firms is an "apparent camouflaged management buyout."

The suit, which is pending in The Delaware Court of Chancery, names the company, its board of directors, and its proposed buyers, Apollo Management and Texas Pacific Group, as defendants.

Under the terms of the offer, which was announced on October 2, the private equity firms would pay $81 in cash per share.

Harrah's indicated that it had established a special committee of independent directors to review the offer and retained UBS Securities LLC as an adviser.

The class action seeks to stop the proposed buyout and conduct "a fair process" for selling shares of Harrah's, the world's largest casino operator.

Harrah's operates approximately 40 casinos throughout the country under a number of different nameplates, such as Caesars, Ballys, Horseshoe and Showboat.

Press reports have also indicated that in the week leading up to the buyout offer, there were unusual increases in the trading of Harrah's call options and five-year credit-default swaps.

According to data provided by Options Clearing Corp., call option contracts in Harrah's shares were exchanged four to six times the average daily volume of August on the Tuesday, Wednesday and Thursday before the bid was announced.

Daily Trivia: Among the investments held by Texas Pacific Group is Cranium, Inc., the fourth largest board game company in the world, and manufacturer of the popular line of Cranium games. Cranium is headquartered in Seattle, which has been described as "the Boardwalk of popular board games." The "Emerald City" is also home to Screenlife, LLC, manufacturer of the "world's most popular DVD games," including the award-winning line of Scene It? games.

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