Las Vegas ? Harrah’s Entertainment Inc. is buying Caesars Entertainment Inc. for about $5.2 billion in cash and stock in a deal that would create the largest gambling company in the world.

The deal announced Thursday eclipses last month’s high-profile MGM Mirage merger with Mandalay Resort Group while setting up a battle for customers on the lucrative Las Vegas Strip.

A source familiar with the deal, speaking on condition of anonymity, said Harrah’s and Caesars began negotiating after MGM Mirage completed its deal last month to buy Mandalay for $4.8 billion in cash.

Both deals will face intense scrutiny from federal and state gambling regulators.

Under terms of the deal announced Thursday, Harrah’s will pay $1.8 billion in cash and exchange about $3.4 billion in Harrah’s stock for all of the shares of its Las Vegas-based rival.

That values Caesars’ common stock at $16.96 a share, a 6 percent premium over its closing price of $16 on Wednesday. Harrah’s also will assume about $4.2 billion in Caesars Entertainment debt in the deal.

The deal has been approved by the boards of both companies but is subject to approval by shareholders and regulators.

On the New York Stock Exchange, shares of Caesars closed down 95 cents, or 5.9 percent, to $15.05, while Harrah’s shares fell $3.07, or 6 percent, to $47.91.

Harrah’s Entertainment, which operates heavily with riverboat casinos, has 28 casinos in 13 states under the Harrah’s and Showboat names. It has about 41,000 employees.

Harrah's Entertainment Inc. plans to buy Caesars Entertainment Inc. for more than billion in cash and stock. Harrah's casino and Caesars Palace are shown June 14 in Las Vegas.

Caesars has 28 properties worldwide, including Caesars Palace and Bally’s Las Vegas, and employs 54,000.

“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.

Stephen Bollenbach, Caesars Entertainment chairman, said it was “an outstanding transaction for both parties.”