LAS VEGAS — Harrah's Entertainment received a $15.05 billion offer for the company from two private-equity firms in what would be the biggest deal ever for a casino operator and the fifth-largest leveraged buyout in history.
Harrah's said Monday that Apollo Management and Texas Pacific Group are offering $81 per share in cash, a 22 percent premium to Harrah's closing stock price Friday.
Harrah's shares surged $9.25, or 13.9 percent, to close at $75.68 on Monday on the New York Stock Exchange.
Harrah's said it had not committed to the deal, but it established a special committee of independent directors to review the offer and retained UBS Securities LLC as an adviser.
The company did not respond to calls for comment.
Harrah's operates about 40 casinos throughout the country, including Caesars Palace in Las Vegas, and other casinos under the names Ballys, Horseshoe and Showboat. The Las Vegas-based company beefed up its portfolio with last year's purchase of Caesars Entertainment Inc., giving it an upscale offering on the Las Vegas Strip.
Analyst Rod Petrik of Stifel Nicolaus said Harrah's shares had been relatively cheaper than its peers in the casino business for several reasons, "perhaps none more important than its inability to crack into the growing Asian gaming markets."
Gambling companies' shares also appeared cheaper than shares in other sectors, providing a prime target for private equity investors, he said in a research note.
Celeste Brown of Morgan Stanley said the benefit of a possible deal would be in managing and expanding the Harrah's network of casinos rather than selling off the parts.
"Neither a reduction in investment or asset sales (unless they maintain management contracts) makes sense if the value is to be realized," she said in a research note.
New York-based Apollo Management, with some $10.1 billion in funds under management, did not immediately respond to a request for comment. A spokesman for Texas Pacific Group, with more than $20 billion in funds, had no comment.
If the deal is consummated, it would be the fifth-largest leveraged buyout ever, excluding assumed debt of $10.7 billion, according to data from Thomson Financial. The largest ever was RJR Nabisco Inc.'s $25 billion acquisition by Kohlberg Kravis Roberts & Co. in 1998.
Private equity funds have been buying into the casino industry since 1998 when Los Angeles-based fund Colony Capital bought Harveys Casino Resorts for $420 million, and followed up with the $280 million purchase of the Las Vegas Hilton casino-hotel in 2004.
A combination of casinos' valuable real-estate holdings and cash generating power has proven attractive to private funds, but the latest deal would be the biggest in the industry's history, said Roger Aguinaldo, publisher of The M&A Advisor.
Its hefty size is also seen as convenient to global private equity firms, which amassed some $750 billion in funds last year, he said.
"It's like dry powder, if you will, and they're looking for deals," Aguinaldo said.