Magna's Stronach Plans To Separate Racing, Real Estate Assets
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Stronach Separating MEC's Horse
Racing, Real Estate Assets |
Magna Entertainment Corp. (MEC) Chair Frank Stronach "laid down a wager yesterday on his distressed racetrack and gambling venture, betting that taking control of it himself will eventually lead to a payoff," according to Greg Keenan of the Toronto GLOBE & MAIL. Stronach yesterday "pulled the trigger on a complex three-way deal" in which MEC parent company MI Developments Inc. (MID) will "shed its money-losing racetrack and gambling assets." The move "could broker a peace with some investors" in MID after a "two-year battle to divest the horse racetrack assets, which are held in [MEC] and have lost more than half a billion dollars" since '03. Stronach will pay $25M (all figures U.S.) to take a controlling 59% stake in MEC from MID, which then will "become a pure real estate company." MID will transfer $150M in cash, $247M in debt owed to it by MEC and real estate in Aurora, Ontario, to an unnamed company "controlled by [Stronach] that will hold the MEC stake." Keenan notes the proposal comes as MEC "tries to reduce debt and raise money by selling off excess real estate and some racetracks in the midst of a massive downturn in the U.S. real estate market, where all but one of its tracks are located." MEC has lost $507M since '03 (Toronto GLOBE & MAIL, 4/1). In Baltimore, Jamie Smith Hopkins reports the restructuring leaves "unanswered the question of where the money-losing racing operation would get its financing." Financial interconnections between MEC and MID "have drawn criticism," and under the proposed reorganization MID "would be prohibited from entering into any future transactions" with MEC without unanimous approval of its BOD (Baltimore SUN, 4/1).
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