Promus to Split Its Hotel, Harrah’s Casino Businesses : Gaming: Move will create North America’s largest gambling-only firm. Analysts see both segments benefiting.

CHICAGO —  Promus Cos. said Monday it is separating its hotels and Harrah’s casino businesses, creating the largest stand-alone gaming corporation in North America, with $1.64 billion in assets.

The Harrah’s casino business has about 80% of the company’s assets. The remainder consists of its Embassy Suites, Hampton Inn and Homewood Suites hotels.

Under the tax-free deal, stockholders will receive one share of the new hotel company for each two shares of Promus they own.

Investors cheered the news, sending Promus shares up $1.625 to close at $32.875 on the New York Stock Exchange.

“I don’t see any downside in this transaction. Both are in growth industries,” said Marvin Roffman, president of Roffman Miller Associates, a money management firm.

The casino company is expected to be called Harrah’s Entertainment Inc., and the hotel business, Promus Hotels. Both companies will maintain corporate headquarters in Memphis, Tenn., and will be headed by Promus’ current chairman.

Harrah’s, with 15 casinos in eight states, earned $99 million on revenue of $1.3 billion last year, according to preliminary results released by the company.

It is the only casino company with operations in every segment of the casino entertainment industry--traditional land-based, riverboat, dockside, limited-stakes and casinos on Indian lands.

Promus Hotels has more than 560 properties, with $399 million in assets. The hotel segment had revenue of $243 million and earnings of $32 million last year, and analysts say it could also benefit from the separation.

Under the plan, Michael Rose, chairman of Promus, will be chairman of the board of both companies.

“Promus’ two businesses are each large, well-respected businesses that are leaders in their industries,” Rose said in a statement.

“Our hotel business has reached the size, scope and financial performance that it can sustain a high growth level without resources from the casino entertainment business.

“At the same time, our casino business has grown dramatically over the last five years, demanding an increasingly large capital and management talent investment,” he said.

“By separating the companies, we will be able to more accurately focus accountability and rewards,” he said.

The managers of each business will become more directly accountable to stockholders, and incentive programs will be tied to the share price of each company, Rose said.

Philip Satre, president and chief executive of Promus, will remain president and chief executive of the casino entertainment company and a member of its board.

Raymond Schultz, president and chief executive of the Promus Hotels division, will become president, chief executive and a member of the board of the hotel company.