Harrah's Buys Into Macau

LAS VEGAS (AP) – Casino operator Harrah's Entertainment Inc. said Wednesday that one of its subsidiaries acquired a golf course in Macau for undisclosed terms, marking its first entry into the lucrative gambling market but without the rights to build a casino.

Harrah's, which is being taken private in a $17.1 billion transaction, has struggled to find a foothold in Asia while its Las Vegas-based competitors have rushed into the market with massive investments.

The purchase of the 18-hole Macau Orient Golf course, on about 175 acres on Cotai across from the Macau Studio City development, will allow Harrah's to serve Asian customers who visit its Caesars Palace casino-hotel in Las Vegas, said Michael Chen, Harrah's president of the Asia-Pacific region.

“Our guests at Caesars Palace are very important to us and we want to be able to service them,” Chen told The Associated Press. “They go to Macau today. We want to deepen our relationship with them.”

Chen said the Macau course will be improved and likely be part of the casino company's Total Rewards system in which it offers complimentary services in exchange for action on the casino floor.

Analysts predicted that Harrah's will use the purchase to break into the casino business in Macau, although it would have to partner with one of the six existing licensees.

“What will they do with it? Turn it into a casino complex,” said Morgan Stanley analyst Celeste Brown in a research note. “Plan B, if the government does not want to let them build immediately, would be to sit on the land to sell later to concession holders.”

Harrah's said it did not need to reveal the cost of the transaction because it was not material to its earnings.

Analyst speculation that it paid $3 billion for the property is “nowhere near” the mark, Chen said. The company bought the property from a private Taiwanese investor and a Macau investor using “existing debt facilities,” he said.

Chen said the company had no immediate plans to develop the land into a casino or partner with a licensee to do so.

“Our intelligence so far has said it's unlikely that new licenses will be issued in 2009. But anything can happen in a long period of time. It wouldn't be my place to predict what would happen.”

Shares of Harrah's fell 5 cents to $86.59.