Las Vegas lines up a play for British casinos

The world’s largest gaming company, Harrah’s Entertainment, is examining a move to break into the British casino market.

The firm, listed in New York and valued at USD 11 billion (GBP 5.8 billion), is studying a proposal to buy two British casino groups, Stanley Leisure and London Clubs International (LCI).

These two companies are in the advanced stages of completing a GBP 634m merger.

Gary Loveman, Harrah’s chief executive, may decide to wait until this merger is completed before he moves. According to sources in the gaming community, the American group has made a detailed appraisal of both companies.

Loveman, a former Harvard Business School associate professor and the son of a factory worker, is keen to expand his group’s overseas activities.

Stanley Leisure is Britain’s largest casino operator and among its stable of clubs is London’s Crockfords, a favoured haunt of high rollers.

LCI is half the size of Stanley Leisure and operates six casinos in Britain and three overseas. It has been awarded a further six licences in cities that include Manchester, Glasgow and Blackpool.

This combined portfolio of clubs, although small change for a company the size of Harrah’s, is attractive to the American firm.

Its share price, which has been as high as USD 80, has dropped to about USD 60 amid concerns of soaring construction costs in Las Vegas.

To address this concern, Loveman is thought to be preparing to step up the pace of international expansion. Harrah’s already has a number of overseas developments in the pipeline. Last year it signed agreements to develop a USD 700m casino resort in Slovenia and a USD 670m casino resort near Madrid.

Founded in 1937, the company had seen Asia as a better prospect for growth and was heavily involved in bidding for the right to develop new casinos in Singapore and Macao but lost out. It is now looking more closely at Europe.

Analysts said that a combined Stanley Leisure/London Clubs would create the ideal platform on which to build a European presence.

One potential area of concern would be management, and it is not clear whether Harrah’s would want to retain the teams running London Clubs and Stanley Leisure.

Harrah’s was best known for its riverboat casinos and operations on Native American reservations until two years ago when it bought Caesar’s Entertainment for USD 5.3 billion. With that deal Harrah’s leapfrogged MGM Mirage to become the world’s biggest gaming firm.

The founder, William Harrah, was seen as one of the architects of modern Las Vegas. He campaigned to strengthen the gaming laws in order to drive out corruption and was the first to invite African-American entertainers to perform at his casinos. He also removed the ban on women croupiers.

The company is now in the hands of Loveman, who when he joined, traded his Honda Accord for a Ferrari F-355 Spider. He commutes from his home near Boston to Las Vegas by private jet.

Senior executives from the company have recently been in London, but there is no certainty a deal will take place.

A Harrah’s spokesman said he had “no knowledge” about any corporate activity involving Stanley Leisure.

The invasion of the American gaming giants has long been anticipated in Britain, but so far most of the companies available for acquisition have been too small to interest the Americans. However, with the consolidation that has taken place in the industry, this has changed.

LCI, which is chaired by Michael Beckett, recently sold its flagship London casino Les Ambassadeurs for £115m. The disposal significantly reduced the group’s debts. Its talks with Stanley Leisure are still going on and a conclusion is expected by the end of this month. Harrah’s may choose to sit on the sidelines and watch.