July 15 (Bloomberg) -- Harrah's Entertainment Inc., the No. 2 U.S. casino company, agreed to buy Caesars Entertainment Inc. for $5.28 billion, the Wall Street Journal said on its Web site, citing unidentified people familiar with the companies.

The agreement values Las Vegas-based Caesars at $17.17 a share, the newspaper said, without saying if the transaction includes cash, stock or both. Harrah's, also based in Las Vegas, will assume $3.97 billion in debt, the newspaper said.

The deal would create the world's largest casino company. Harrah's Chief Executive Gary Loveman, 44, would gain four Las Vegas casinos including Caesars Palace and Paris Las Vegas at a time when the number of visits to the No. 1 gambling market in the U.S. is surging. MGM Mirage, the No. 3 casino, last month agreed to buy Mandalay Resort Group for $4.8 billion in stock.

``After the last deal in the group everyone looked to Caesars as the last girl standing,'' said Mark Foster, who manages $500 million, including shares of Caesars, at Kirr Marbach & Co. in Columbus, Indiana. ``It gives Harrah's more muscle to compete with that other combination.''

Harrah's purchase would produce a company with $8.8 billion in annual revenue, 54 casinos and 102,000 employees. MGM Mirage and Mandalay's combined revenue would be $6.4 billion.

The boards of the two casino operators approved the terms late yesterday, the Journal said, citing the unidentified people. The transaction is expected to close within about a year after receiving regulatory approval, the newspaper reported.

Harrah's shares yesterday fell 1.9 percent to $50.98 in New York Stock Exchange composite trading. The shares have climbed 2.4 percent this year. Caesars stock rose 14.9 percent to $16, and has added 47.7 percent this year.

Caesars spokesman Robert Stewart declined to comment to Bloomberg News on the Wall Street Journal story. Harrah's spokesman Gary Thompson didn't immediately return two calls from Bloomberg News to his office.

(Wall Street Journal 7-14 online)

To contact the reporter on this story: Edvard Pettersson in Los Angeles at epettersson@bloomberg.net.

Last Updated: July 15, 2004 05:34 EDT