Deals elevate Black's image

Last week was a good week to be Leon Black. In the course of just three days, Black, the enigmatic founder of the Apollo Group, a private equity firm, has struck about $37 billion worth of deals.

On Sunday, Apollo acquired Realogy, the giant real estate franchiser that owns Coldwell Banker, Century 21 and Sotheby's International Realty. That deal was trumped by a $27.8 billion deal Tuesday for Harrah's Entertainment, the world's largest casino company. The acquisition, which includes the assumption of $10.7 billion in debt, was made in tandem with the Texas Pacific Group.


While Texas Pacific has long been acknowledged as being in the top tier of private equity, Apollo - and Black - have largely avoided the limelight.

With Harrah's, its new crown jewel, that will change. Harrah's is the leader in the industry, operating 39 casinos in the United States, including Caesars Palace in Las Vegas and the Showboat in Atlantic City. Harrah's is also expanding overseas, with projects recently announced in the Bahamas, Slovenia and Spain.


The acquisitions last week and Apollo's new $12 billion fund have catapulted Black, 55, a former lieutenant of Michael R. Milken, into the upper echelons of private equity - in a league with Henry R. Kravis of Kohlberg Kravis Roberts and Stephen A. Schwarzman of the Blackstone Group.

Black declined to comment for this article.

The recent successes could elevate Black's image beyond one marred by personal tragedy and clouded by the scandals of the late 1980s at Drexel Burnham Lambert, where he first made his name.

While he was still at Harvard Business School in 1975, his father, Eli Black, chairman of United Brands, forerunner of Chiquita Brands International, leapt to his death from his 44th-floor office in the Pan Am Building in Manhattan. Investigators later discovered the senior Black's involvement in a Honduran bribery scandal, one that led to sweeping legislation against corporate bribery.

In the 1980s, Leon Black was the head of leveraged buyouts at Drexel, which was then designing revolutionary tools in corporate finance. Investors and entrepreneurs such as Carl C. Icahn and T. Boone Pickens were shaking company boardrooms with takeover offers financed by high-yield bonds - a type of sub-investment-grade lending that Milken of Drexel popularized.

In a book chronicling the era, The Predators' Ball, Black is described as being extremely well-connected to corporate executives and close to Milken, even though Milken worked in Beverly Hills, Calif., and Black was based in Manhattan. When Drexel collapsed amid felony charges and scandal in 1990, Black emerged unscathed.

Apollo made its name by buying junk bonds. The best-known was the debt portfolio of the insurer Executive Life, a former Drexel client. Though it had a face value of about $6 billion, Black was able to buy it for less than $3 billion.

Apollo also found success in scooping companies out of bankruptcy and turning them around for profit. Some of its notable successes have included Intelsat and Telemundo, the Spanish-language broadcaster that NBC bought in 2001.


The gambling business gives Apollo a much larger public footprint, and it will put it under the scrutiny of more regulators.

It has been the sometimes bewildering thicket of regulations that has stymied many private-equity gambling deals. Wall Street is familiar with betting the house; with Harrah's, both Apollo and Texas Pacific get to be the house.

Under the terms of the deal announced last week, the private equity firms will pay $90 a share for Harrah's - an 11 percent increase over their original offer of $81 a share in October and a 36 percent premium to the price before Harrah's disclosed that bid.

The board of Harrah's had also been considering a rival offer from Penn National Gaming, which runs casinos and racetracks.

Harrah's was built into the nation's largest casino operator under the leadership of an outsider, Gary Loveman, a former Harvard Business School professor who will remain chief executive.

Loveman joined Harrah's in 1998, after he did some research on the gambling chain and sent his suggestions to its chief executive, Philip G. Satre. The recommendations seemed on target, and Satre invited Loveman to become chief operating officer. He was elevated to chief executive in 2003 after Satre retired.


A vital tool in that program is a huge consumer database, which Harrah's mines to find people likely to be the most profitable repeat visitors.

The most lucrative customers, Loveman found, tended to be frequent rollers from the Midwest instead of the high rollers wooed by other casinos. So Harrah's offered NASCAR dads and slot-machine-playing grandmothers cheap air fares on chartered planes to its casinos, and these middle-market gamblers enabled the casino to prosper.

New York Times staff writer Steve Lohr contributed to this article.