Jeff Simpson on Harrah’s Entertainment buyout offer and the draw of online poker

Sun, Oct 8, 2006 (7:43 a.m.)

There's a lot of mystery surrounding the $15 billion Harrah's Entertainment buyout offer, and with company executives and the two private equity firms that made the epic bid keeping quiet, it may be awhile before the fog lifts.

My best guess - and this is pure speculation - is that Harrah's Chief Executive Gary Loveman is much more upbeat than Wall Street and investors have been about the potential of major development plans in Las Vegas and Atlantic City.

The company last week announced a deal to acquire the Barbary Coast, a critical piece for its Center Strip plans, and has already purchased hundreds of acres of land east of the Strip behind its wall of properties that run from Harrah's at the north end to Paris at the south.

But the company's stock has languished recently and my guess is that Loveman sees the private equity market as best able to withstand the short-term pain that would accompany tearing down a couple of old towers on the Strip. The new owners' investment and patience would be rewarded with a reorganized company that would be worth much more than it was before the offer was made.

Las Vegas has a lot of poker players who are beside themselves with anger because of the new Internet gambling legislation now awaiting the signature of the president.

There are thousands, and probably more than 10,000, Las Vegans who play poker for money online.

Although playing online poker is already illegal under Nevada law, state officials have no intention of prosecuting players. But the new federal law, slated to take effect 270 days after President George W. Bush signs the bill, will make it more difficult for many Las Vegans to find a place to play.

The likely effect of the new law would be to force some of the biggest online poker rooms out of the business of taking U.S. bets, even though 60 percent or more of their action comes from this country.

Poker sites that have publicly traded stock have already indicated their intention to stop taking U.S. bets once the law takes effect, including PartyGaming, owner of the world's biggest online poker room, PartyPoker.

Undoubtedly plenty of other sites will see the new law as an opportunity to grow their market share by capturing business PartyPoker and others give up and will continue to flout U.S. law and take bets from Americans.

Restrictions on the ability to put money into online betting accounts will also make life more difficult for Americans who want to play Internet poker, but probably won't make it impossible.

The poker community just can't understand why the federal government would interfere with what they see as their right to play poker online, in their own homes. For Las Vegas players, even though they can play legally in dozens of casinos, online poker is a much more profitable hobby - or occupation.

The players are worse, the games are much faster, it's possible to play several games at once and there's no tipping.

Many of those who make money from the online poker business, players, magazine publishers and online sites, have ignored the illegality of the game because the money was just too sweet.

That won't change, because the money's too big. But the business - and a lot of Las Vegas poker players - just got a big slap in the face. And if the poker community keeps whistling past the graveyard, pretending that there's nothing wrong with flouting the law in pursuit of easy money, even tougher crackdowns are ahead.


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