Golden Parachute Cradles Harrah's CEO

FILE-- Gary Loveman, Chariman and CEO of Harrah's Entertainment speaks during a forum on the state of the gaming industry Wednesday, Oct. 6, 2004, in Las Vegas.Loveman, the chief executive of casino giant Harrah's Entertainment Inc., will receive about $94 million in stock options and other rights if the world's largest casino buyout deal is consummated, according to documents filed with the Securities and Exchange Commission Thursday Feb. 8, 2007. It would be the largest going-private deal ever for a publicly held casino company and, excluding debt, the seventh biggest leveraged buyout deal of any kind of company. . (AP Photo/Joe Cavaretta) (Joe Cavaretta - AP)

Penn submitted its own bid on Nov. 27 for $71 in cash plus a stock swap it said took the offer to $87 a share. The bid prompted Harrah's to set a deadline of Dec. 12 for final offers from both sides.

Apollo and Texas Pacific raised their offer to $88.50 in cash on Dec. 12, while Penn's proposal was worth $86.92, with $71 of that in cash and the rest in stock.

In meetings at UBS' office in New York, the special board committee discussed both offers over the next few days but expressed concern that a merger with Penn could raise antitrust concerns with authorities. Penn operates 12 casinos, seven race tracks and seven off-track wagering facilities in locations from Ontario, Canada, to Pennsylvania, Illinois and Mississippi.

Harrah's management even proposed a blockbuster third option, a leveraged recapitalization plan that would borrow a whopping $6.3 billion and spread the proceeds to shareholders in a special dividend of $33 a share.

The committee told Apollo and Texas Pacific on Dec. 14 that the group had a deal if it bumped the price to $91 per share. The group came back saying $90 was its "best and final" price, and the two sides finally agreed after also agreeing on hefty breakup fees if the deal collapsed.

The Associated Press reported Dec. 18 that the final touches were being put on a deal between Harrah's and Apollo/Texas Pacific at $90 a share. That afternoon, Penn raised the cash portion of its bid by $2.13 a share, to a total $89.95, conditioned on insurance receivables it might receive on a separate matter.

After talks with UBS and Harrah's director R. Brad Martin, Penn made a last ditch effort a day later, agreeing to add another $200 million in cash, or $1.03 a share, if Harrah's agreed to cut future capital spending by the same amount, with an offer that potentially reached more than $90 a share.

But the Harrah's committee noted the deal had too many conditions that did not seem likely to come to pass and went ahead with the deal with Apollo/Texas Pacific, the document showed.

Meanwhile, Penn's chief executive seemed burned out by the whole process.

In a Thursday morning conference call, Carlino told analysts that while Penn is still looking to expand, the cost of buying casinos might have gotten too high.

"Clearly, we have stated publicly that we'd like to be in Atlantic City. We'd like to be in Las Vegas. We'd like to be in a couple of other major cities where we've poked around from time to time," he said. "It's not clear at all that there are properties in any of those markets, frankly, at prices we'd want to pay. And we may not."

"We have to look a lot more carefully and cautiously at what's out there," he said. "So, is it tougher today than it was previously? Absolutely."

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On the Net:

Harrah's Entertainment Inc.: http://www.harrahs.com

Penn National Gaming Inc.: http://www.pngaming.com