Dec. 18 (Bloomberg) -- Harrah's Entertainment Inc., the world's largest casino company, received a buyout offer of as much as $16.7 billion from Apollo Management LP and Texas Pacific Group, two people familiar with the proposal said.

Harrah's board considered the leveraged buyout proposal yesterday, said three people with knowledge of the meeting. The bid, valued at as much as $90 a share, makes Texas Pacific and Apollo the most likely buyers, the people said. It comes more than two months after the firms offered $15.1 billion for the Las Vegas-based owner of Caesars Palace and the Flamingo casino.

A takeover would be one of the biggest leveraged buyouts ever and would top Las Vegas-based Harrah's own $9.4 billion purchase of Caesars Entertainment Inc. last year as the largest acquisition in the casino industry. Penn National Gaming Inc., a casino company with one-fifth Harrah's market value, bid $87 a share in cash and stock, the Wall Street Journal reported last week.

Harrah's spokesman Alberto Lopez said he couldn't comment on ``market speculation.'' Texas Pacific spokesman Owen Blicksilver and Apollo's Steve Anreder also declined to comment.

Apollo and Texas Pacific are proposing what would be the sixth-largest leveraged buyout, behind RJR Nabisco's $25.1 billion takeover by Kohlberg, Kravis Roberts & Co. in 1998, according to data compiled by Bloomberg. The largest buyout ever is Blackstone Group LP's agreement in November to purchase Equity Office Properties Trust for $33 billion, including debt.

Initial Offer

Harrah's said Oct. 2 that the firms initially offered $15.1 billion, or $81 a share, a bid later raised to $15.5 billion, or $83.50 a share, on Oct. 11.

Shares of Harrah's rose 40 cents to $79.50 Dec. 15 in New York Stock Exchange composite trading. The stock has risen 12 percent in 2006, lagging behind Las Vegas Sands Corp. which has more than doubled, and MGM Mirage, which has climbed 51 percent.

At $90 a share, Texas Pacific and Apollo would be paying less for Harrah's profit than what Las Vegas Sands or MGM are worth on the stock market. Harrah's is being valued at 21.4 times projected 2007 earnings, based on the average estimate of 18 analysts surveyed by Bloomberg. That compares with a 24.6 ratio for MGM Mirage and 50.7 for Las Vegas Sands at last week's stock market prices, according to Bloomberg data.

Harrah's owns or is in the process of opening more than 40 properties in 13 U.S. states, the Bahamas, Spain and Slovenia. The company is an attractive takeover target because of its steady cash returns and wide geographic base, said Matt Sodl, managing director of Innovation Capital LLC, a Los Angeles-based investment banking firm specializing in casinos.

Penn National owns and operates 16 casinos and horse-racing facilities in 12 states and Canada.

Record Buyouts

Private equity and management-led takeovers announced this year have reached a record $657 billion, according to data compiled by Bloomberg through Dec. 15. Leveraged buyout funds have raised a record $170 billion from January to the beginning of October, according to London-based Private Equity Intelligence Ltd.

New York-based Apollo Management founding partner Leon Black was the former co-head of corporate finance at now-defunct Drexel Lambert Inc., the top underwriter of high-yield corporate debt before collapsing in 1990. Black, 55, founded Apollo Management that year and has since made equity investments of more than $16 billion.

Texas Pacific created the world's second-biggest buyout fund this year, raising $15 billion.

The firm has raised more than $28 billion through six funds in the 14 years since it was founded by David Bonderman, James Coulter and Bill Price. It has invested in about 75 companies, including Burger King Corp. and Continental Airlines Inc.

To contact the reporter on this story: Oliver Staley in New York at ostaley@bloomberg.net; Dana Cimilluca in New York at dcimilluca@bloomberg.net.

Last Updated: December 18, 2006 00:28 EST