When Colony Capital spent $1.2 billion to buy an additional four gambling parlors from Harrah's and Caesar's last April, the firm became the proud owner of the largest privately held casino company. Although those investments have had a shaky first year, there is no denying Colony's strength in the gaming sector. All of this was set in motion by one purchase: the firm's 1999 acquisition of Harvey's Casino Resorts in Lake Tahoe for $405 million. The firm later sold the company, which also owns hotels and casinos in Iowa, to Harrah's for $625 million two years later.
“When Colony bought Harvey's, we saw an industry with only big, strategic players and no one to sell to except each other,” Colony chief executive officer Tom Barrack told sister publication Private Equity International last year. “We thought we could act as a liaison to all these larger companies. Now, the consolidation in the industry has been great fuel for our acquisition program.”
Today Colony is one of the few private equity firms licensed in US gaming— Barrack has referred to the licensing process as a Bataan death march—and its acquisitions have included the Las Vegas Hilton and the Resorts company. Earlier this year, the firm joined a consortium of investors including Goldman Sachs and Providence Equity Partners in acquiring Kerzner International, the owner of the Mohegan Sun Casino in Connecticut and the Atlantis Resort in the Bahamas, for $3.6 billion. With deregulation occurring across the country and more and more US states legalizing some form of gambling, the gaming sector is big business these days and Colony is one of its biggest players. The firm is even looking overseas: In conjunction with the Las Vegas Sands, Colony portfolio company Fairmont Hotels is planning to develop a new resort in Far East gaming mecca Macau.