Daytona International Speedway is among the tracks owned by ISC.Getty Images
NASCAR’s surprising bid to purchase International Speedway Corp. was received positively by industry analysts who believe it primes the sport for much-needed consolidation, although sentiment was split as to whether the move foreshadows an eventual outright sale by the France family.
With a late Friday afternoon release earlier this month, NASCAR announced it would bid $42 a share, or around $1.9 billion, to acquire the publicly traded track operator, which the Frances tightly control with around 75 percent voting share. While NASCAR and ISC have integrated some high-level staffing this year, the timing and magnitude of the bid announcement caught most in the industry by surprise. Even some senior leadership at the companies were not informed of the move until just as it was being announced publicly, sources say.
The non-binding offer by NASCAR is subject to the approval of a majority of ISC’s shareholders, and the deal is expected to take several months to close even if it does not encounter any issues. ISC may end up having to increase the offer, which is a multiple of 11 from ISC’s current EBITDA of around $220 million, according to Morningstar analyst Jaime Katz, who follows ISC and believes the winning bid could have to hit a multiple closer to 15 times EBITDA, or closer to $50 a share. Market reaction to the bid was largely positive, as shares of ISC were up nearly 10 percent one week after the offer.
It was not clear whether the Frances took on financing to facilitate the bid, but NASCAR did retain Goldman Sachs as financial adviser and Baker Botts as counsel, while BDT & Co. is advising the France family.
The move sets up NASCAR to consolidate track ownership in the sport, and gives it vast control of the sport’s venues and schedule, which have been obstacles in implementing the dramatic change many feel is needed to offer exciting racing and fill grandstands. It could also allow the Frances to maximize efficiencies in staffing and operations. ISC operates 12 NASCAR tracks, including Daytona International Speedway.
Morningstar’s Katz noted that the bid to take ISC private makes sense because it will allow the sport to make long-term moves without the scrutiny of public earnings reports.
“When you have a business that is struggling to facilitate meaningful growth and you’re trying to change strategies — all of that is a lot harder to do when you’re under the scrutiny of Wall Street and public investors,” Katz said. “You step out of that scrutiny of everyone looking at every dollar and each incremental return.”
The precise structure and integration plan under the proposed deal was unclear, as well as who is orchestrating the deal, but sources said to expect ISC’s senior leadership to play an important role for the combined company. Two of the executives who were assigned dual roles this year, Craig Neeb and Daryl Wolfe, were originally at ISC, while the other two, Eric Nyquist and Paula Miller, were originally at NASCAR. People inside both ISC and NASCAR have credited the dual roles for creating efficiency and synergy.
Combining the companies and giving NASCAR greater control could also make it more attractive to a prospective buyer. Comcast had been in discussions with NASCAR as it digests its $40 billion acquisition of Sky, but a combined company would surely be reason for a closer look by any suitors.
Speedway Motorsports Inc., the publicly traded track operator tightly controlled by the Smith family, is seen as the next natural target for NASCAR to go after, if SMI also decided to go private, a notion that has been rumored as a possibility for years. SMI, which operates eight speedways, was trading around $17 per share late last week.
Formerly longtime rivals, a marriage between the companies owned by the Frances and Smiths was once unthinkable. However, sources say that the relationship between the families has never been better, and SMI President and CEO Marcus Smith even liked a tweet sent by France family scion Ben Kennedy that linked to the official announcement on NASCAR’s website. However, people close to SMI also noted that Marcus Smith remains as active as ever, working on major projects such as bringing NASCAR’s national series back to Nashville and helping the sanctioning body put together its new sponsorship model that is set to launch in 2020.
Smith’s activity seems to suggest that he’s not planning to exit the sport, these people said, but whether NASCAR could work out a deal that would bring the SMI tracks under its fold, while allowing some SMI executives to remain in leadership positions, was unclear. Smith has not yet commented on NASCAR’s ISC bid.
Independent tracks could also become a target of NASCAR, especially Dover International Speedway, which is publicly traded, and Pocono, which is private and family-owned. Those track executives have not commented on that topic in years.
