Magna Bolsters Already Strong Presence With MD Tracks
Magna Entertainment has reached a deal to buy a 51% stake in the MD Jockey Club (MJC) for $69M in cash, according to Matt Hegarty of the DAILY RACING FORM, who reported the deal "will give Magna majority shares" in Laurel Park and Pimlico Race Course. MJC President & Chair Joe DeFrancis will retain "full authority" over MJC's operation. The price includes two payments of $9.2M to DeFrancis and his sister, Karin, "for options to purchase their interests in the MJC four years after the deal closes." The options expire after one year. The deal also allows DeFrancis "to sever his ties" with Leucadia National Corp., a N.Y. investment firm that had a minority share in MJC, as Magna is purchasing "all of Leucadia's shares in the track, as well as that of" MJC General Counsel Martin Jacobs (DAILY RACING FORM, 7/15). In L.A., Bill Christine reports that for a 51% interest in Pimlico and a 58% stake in Laurel, Magna is paying $50.6M in cash, plus $18.4M for the option to buy out the DeFrancises. Magna is also assuming the two tracks' $30.2M in debt. Three off-track betting facilities and a training facility in Bowie, MD, are also included in the deal. Magna's stock was off 6% yesterday, closing at $6.05 (L.A. TIMES, 7/16). At presstime, Magna shares were down 1%, to $5.98 (THE DAILY). Magna CFO Graham Orr said that the company will "receive all the profit from the two tracks and will account for the option as a $18.3[M] liability on its books" (GLOBE & MAIL, 7/16). In Baltimore, Morgan & Keyser note that in addition to keeping "day-to-day control under five-year management agreements," the DeFrancises will hold 49% of the voting stock in the operation. The deal values the MJC at $117M (Baltimore SUN, 7/16). In DC, Rick Snider writes the deal is "expected to take several months to complete and requires the approval" of the MD Racing Commission. While "several commissioners quickly have expressed concern over Magna's disappointing performance at Gulfstream [in FL] earlier this year," several MD racing officials "expect the sale to be approved after lengthy commission hearings" (WASHINGTON TIMES, 7/16).
A BIG HORSE PLAYER: In DC, Mosk & Scheinman: "In just four years, [Magna] has established a dominant role in North American racing, buying 14 tracks in the [U.S.] and Canada." Magna Chair Frank Stronach is "on a march to corner the horse-racing industry, in part to feed his simulcasting and at-home betting businesses and to provide programming" for a satellite TV network he will launch this year (WASHINGTON POST, 7/16). The SUN's Morgan & Keyser write Magna has "bet heavily on a coming revolution in racing." The acquisition of Laurel and Pimlico provides a "needed boost in Magna's holdings, filling a summer and fall gap in its racing calendar when many of its other tracks aren't running live meets." Magna President & CEO Jim McAlpine said that it is "too soon to be specific on the improvements [to be made at the tracks] but [that] the Preakness would remain at Pimlico." McAlpine: "One of our first priorities is to make Pimlico a better home for the Preakness" (SUN, 7/16). In N.Y., Joe Drape writes Magna has now "become North America's leading owner and operator of thoroughbred racetracks, based on revenue, and a leading simulcast supplier of live racing." McAlpine: "In 2003, we'll have 1,700 days of live racing versus the 711 days we had in 2000. We are trying to build a racing channel that can deliver a race every three to five minutes" (N.Y. TIMES, 7/16).
AN IMPROVEMENT FOR RACING FANS? In DC, Andrew Beyer writes, "Marylanders who have grown cynical over the years may reasonably wonder whether Magna's presence will change much of anything. After all, DeFrancis's critics blame him for many of the problems in the sport — and he'll continue to run the tracks for at least the next five years. Moreover, Magna has not distinguished itself as a racetrack operator, earning a barrage of criticism after a dismal winter season at Gulfstream Park." But Stronach "cannot be criticized for a lack of vision" (WASHINGTON POST, 7/16). In Baltimore, Jon Morgan notes DeFrancis' "mixed record" at the helm of the MJC. While DeFrancis has "kept the tracks afloat, pared their debt and overseen new records in attendance and betting" from the Preakness, "by most standards, day-to-day racing in the state has declined, and [MD] has lost its status as a national innovator and leader as the industry consolidated elsewhere" (Balt. SUN, 7/16).
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