Harrah’s Entertainment to Acquire Caesars

Harrah’s Entertainment, Inc.
has signed a definitive agreement to acquire Caesars Entertainment, Inc.
in a cash and stock transaction that would be the largest in
gaming-industry history. The boards of directors of both companies have unanimously approved the
transaction, which remains subject to approvals by Harrah’s and Caesars
shareholders and regulatory agencies.

Under terms of the agreement, Caesars shareholders will receive an
aggregate of $1.8 billion in cash and 66.3 million shares of Harrah’s
Entertainment common stock. Caesars shareholders will be able to elect to
receive solely shares of Harrah’s common stock or cash, to the extent
available.

Based on the closing price of Harrah’s Entertainment stock on July 14,
2004, the transaction would value each share of Caesars common stock at
$16.96. The total transaction value, including assumption of Caesars debt,
would be approximately $9.44 billion.

The agreement calls for a certain number of Caesars’ current directors to
join the Harrah’s Entertainment board.

Caesars operates 28 casinos with about 2 million square feet of gaming
space and approximately 26,000 hotel rooms. The company has a significant
presence in Las Vegas, Atlantic City, and Mississippi and its brands are
among the most highly regarded in the gaming industry.

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Harrah’s operates 28 casinos with about 1.7 million square feet of gaming
space and approximately 15,650 hotel rooms.

“This acquisition will solidify Harrah’s position as the pre-eminent
distributor of casino entertainment,” said Gary Loveman, Harrah’s
Entertainment president and chief executive officer. “We are adding
attractive assets in stable markets with outstanding long-term growth
prospects where we have a demonstrated record of success. Our network will
also be enhanced as Caesars provides us access to new markets and new
customers, which will bolster what is already the world’s largest
player-loyalty program.

“Harrah’s has achieved noteworthy success by developing and implementing
capabilities across our network of properties that increase customer
loyalty and improve operating efficiency,” said Loveman. “We believe we
can enhance Caesars’ performance by deploying our capabilities into its
operations. We estimate we can realize approximately $80 million of
synergies in the first full year of the acquisition, with significantly
more expected over time.”

“This is an outstanding transaction for both parties,” said Stephen
Bollenbach, Caesars Entertainment chairman. “Harrah’s strong leadership
and operating proficiency will take Caesars’ assets to another level of
performance. At the same time, the transaction delivers excellent value to
our shareholders—including an ownership position in the world’s largest
and most diversified gaming company—and significant growth
opportunities for our employees.”

“We are particularly pleased to be acquiring some of the premier
properties on the Las Vegas Strip, in Atlantic City and on the Mississippi
Gulf Coast,” Loveman said. “This will afford the customers of both
companies the widest range of resort destinations offered by any gaming
operator and will enhance the casino-industry’s most recognized
customer-loyalty program.”

The transaction represents a multiple of approximately 8.0 times analysts’
estimates of Caesars’ 2005 earnings before interest, taxes, depreciation
and amortization (EBITDA), before consideration of any synergies. The
transaction is expected to close in about a year, depending on approvals
by regulators and shareholders of both companies. Harrah’s expects to
maintain its investment- grade rating following the transaction.

Deutsche Bank Securities Inc. and Latham & Watkins LLP advised Harrah’s in
the transaction. UBS Investment Bank and Skadden, Arps, Slate, Meagher &
Flom LLP advised Caesars.

Harrah’s will host a conference call July 15, 2004, at 9 a.m. Eastern
Daylight Time to discuss the transaction. Those interested in
participating in the call should dial 1-888-399-2695, or 1-706-679-7646
for international callers, approximately 10 minutes before the call start
time.

A taped replay of the conference call can be accessed at 1-800-642-1687,
or 1-706-645-9291 for international callers, beginning at noon EDT July
15. The replay will be available through 11:59 p.m. EDT on Wednesday, July
21. The passcode number for the replay is 8790634.

Interested parties wanting to listen to the live conference call on the
Internet may do so on the company’s web site—http://www.harrahs.com/—
in the Investor Relations section behind the “About Us” tab.

Founded 66 years ago, Harrah’s Entertainment, Inc. owns or manages through
various subsidiaries 28 casinos in the United States, primarily under the
Harrah’s brand name. Harrah’s Entertainment is focused on building loyalty
and value with its valued customers through a unique combination of great
service, excellent products, unsurpassed distribution, operational
excellence and technology leadership.
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