Harrahs, Binions Horseshoe, and the World Series of Poker

Harrah's Buys Binion's

Why Harrah's is Interested in Binion's Horseshoe

(3/04) Harrah's Entertainment, which owns or manages 25 casinos in the United States, is primarily interested in purchasing the Binion's Horseshoe name for use in the Nevada market.  Harrah's believes that the Horseshoe name has good recognition and appeal.  Most likely they would rename one or more of their existing casinos but this could also include development of a new casino with the Horseshoe name.  Ideally, they would like to have a Harrah's Horseshoe Casino in Las Vegas, Nevada.  Also, the World Series of Poker is one of the top poker tournaments, growing in popularity, and would be a nice addition to one of Harrah's casinos.  

Harrah's Strategy

In pursuit of this strategy, Harrah's entered into an agreement in September, 2003, to purchase Jack Binion's Horseshoe Gaming Holding Corp. for approximately $1.45 billion.  The deal gives Harrah's the right to use the name Horseshoe outside of Nevada.  Horseshoe Gaming Holdings also operates three riverboat casinos.

This agreement did not include Binion's Horseshoe Casino in Las Vegas, Nevada, owned by another company Horseshoe Club Operating Co. and controlled by Becky Binion Behnen.  But, the agreement did give Harrah's control of a promissory note for money owed by the Horseshoe Club Operating Co.

The note, worth about $20 million, originated from a 1988 loan to the Horseshoe Club and was secured by certain Horseshoe Club assets including the Binion's Horseshoe Hotel & Casino in Las Vegas.  So, if the Horseshoe Club didn't pay the loan back, Harrah's would be in a position to potentially acquire the Binion's Horseshoe Casino in Las Vegas and, what Harrah's really wanted, the right to use the Horseshoe casino name in Nevada.  It wasn't exactly a secret that Binion's Horseshoe Casino was struggling financially.

Harrah's Buys Binion's

The financial issues caught up with the Horseshoe Club and its Binion's Horseshoe Casino within a few months after the Harrah's deal with Jack Binion's Horseshoe Gaming Holding Corp.  The Internal Revenue Service had two liens against the Binion's Horseshoe Casino property totaling $7.5 million.  As a result of unpaid union pension and health obligations, over one million dollars was seized from the casino by federal marshals.  Binion's Horseshoe Casino ceased day to day operations.

The Horseshoe Club was also in default on the loan that Harrah's controlled.  Harrah's could now use the legal process to acquire Binion's Horseshoe Casino pursuant to the loan obligations, or it could negotiate a purchase of the casino and save time and legal expense.

The latter resulted and, in January, 2004, Harrah's reached an agreement with the the Horseshoe Club and Becky Binion Behnen to purchase Binion's Horseshoe Casino, mostly in the form of assumed liabilities.  There will be some regulatory hoops to jump through, but there does not appear to be anything on the horizon that would prevent Harrah's from completing the purchase.

What Will Happen Now

Binion's Horseshoe Casino is expected to reopen April 1, 2004.  Harrah's will manage the day to day operations of Binion's Casino, but is selling the casino (for about $20 million) to Speakeasy Gaming of Fremont Inc. which is a subsidiary of West Virginia-based MTR Gaming Group, a company based in West Virginia.  Harrah's will keep the rights to the Horseshoe name and MTR will have the right to operate under the name Binion's.  Harrah's will also keep the World Series of Poker.

Redeeming Binion's Chips

If you have chips from Binion's Horseshoe Casino, hang onto them and indications are the chips will be redeemable at Binion's Horseshoe once it reopens.  The Nevada Gaming Commission is requiring that $3 million be put aside for this purpose.

World Series of Poker

Harrah's is aware that the World Series of Poker is a valuable asset.  The tournament has been around since 1970.  Last year, the World Series of Poker had over 800 players and a top prize of $2.5 million.  Harrah's has stated that it will re-open Binion's in plenty of time for the tournament.

The 35th annual World Series of Poker will go on (see  World Series of Poker schedule) and is expected to have more than 1,000 players and over $20 million in total prize money.  Players with any concerns can call Harrah's World Series of Poker toll-free phone number: 1-877-FOR-WSOP (1-877-367-9767).

The Future of the World Series of Poker

Harrah's is a well managed operation and has a marketing arm ideally suited to promoting the World Series of Poker and taking it to even greater heights.  The 2004 World Series of Poker will take place at Binion's Casino.  The 2005 WSOP tournament will take place at one of Harrah's casino venues (e.g., Harrah's Las Vegas or the Rio) with the final two playoffs being held at Binion's.  In 2006, the tournament will likely make a permanent move to a Harrah's casino venue.

The Future of Binion's Horseshoe Casino

Binion's Horseshoe Casino will be owned by MTR Gaming Group, a publicly traded company (NASDAQ:MNTG) through its subsidiary Speakeasy Gaming of Fremont Inc.  MTR Gaming Group also owns and operates Mountaineer Racetrack & Gaming Resort in West Virginia, and the Ramada Inn and Speedway Casino in north Las Vegas, Nevada.  MTR Gaming Group is more experienced in horse racing than casino gambling which is probably why the day to day operations of Binion's Casino will be operated by Harrah's under a one year deal with an option for two more years.  Do not be surprised to see the casino renamed simply Binion's Casino. 

While some downsizing may be necessary, it makes good business sense to keep the Binion's Casino operation going.  The casino has a very interesting history and there is value in promoting the casino from that perspective.  Binion's has been around for 52 years and was founded by Benny Binion who was a genuine American character.

There are plenty of glitzy new casinos.  There are not that many casinos with an interesting story, and there is a significant market segment that is attracted to an interesting story and wants to run their hands across the stones of that story.
 

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