Magna Entertainment will hook up with Joe and Karin De Francis to own and operate Laurel Park and Pimlico Race Course under a $117.5-million deal announced July 15. At least a partial sale of the two Maryland racetracks has been rumored for months.
Closing is expected this fall pending regulatory approvals and legislative review. Earlier this year, a few regulators in Maryland questioned Magna's potential involvement in Maryland racing and its handling of racetracks in other states.
A press conference on the sale of Maryland's premier Thoroughbred tracks was scheduled for 1:30 p.m. at Pimlico July 15. According to reports from a Maryland Racing Commission meeting held the morning of July 15, commissioners were informed of the press conference at the meeting, and weren't aware of any details of the Magna-MJC deal.
Magna Entertainment and the De Francis family would share ownership of the Maryland Jockey Club under the deal, but day-to-day management of the the MJC would remain with Joe De Francis and his management team.
Magna would purchase a 51% equity and voting interest in the Maryland Jockey Club of Baltimore City, owner of Pimlico, from LUK-Flats LLC, Martin Jacobs, and the De Francis family. Magna would purchase a 51% voting interest and 58% equity interest in Laurel Racing Association from LUK-Flats and Jacobs, and the entire limited partner interest in Laurel Racing Association from the Laurel Guida Group.
According to a prepared statement, Magna would obtain a 79% economic interest in the Laurel Racing Association. Those interests will cost $50.6 million in cash.
LUK-Flats, Jacobs, the Laurel Guida Group, the De Francis family, and the MJC have agreed to form a joint venture to pursue the feasibility of various development and other business opportunities in Maryland, including the potential development and management of gaming ventures if legislation permits.
Under the deal, Joe and Karin De Francis would retain a 49% equity and voting interest in the MJC of Baltimore City, and a 49% voting interest and 42% equity interest on a fully diluted basis in Laurel Racing Association, with an option to acquire an additional 7% equity interest for a total of a 49% equity interest.
Magna Entertainment has agreed to purchase options from the brother and sister to buy those equity and voting interests at any time in the period beginning 48 months after the closing up to 60 months after the closing. Magna has granted Joe and Karin De Francis the right to sell such interests to Magna at any time during the first five years after the closing. In exchange for its options, Magna has agreed on closing to pay $9.2 million each to Joe and Karin De Francis, and an additional $18.3 million on exercise of the options, subject to an interest adjustment.
Of the total enterprise value of $117.5 million, about $30.2 million is debt.
"The acquisition of a majority interest in Pimlico Race Course and Laurel Park will mark an important milestone in our strategic program of growing Magna Entertainment's racing operations throughout North America," Magna chairman Frank Stronach said.
Said Jim McAlpine, president and chief executive officer of Magna Entertainment: "We are pleased to have the opportunity to invest in Marylan racing. Joe and Karin have put together a great management team. We look forward to supporting Joe and Karin and their team as they work with the Maryland horsemen to expand and grow Maryland racing."
Joe De Francis said the "combination of Magna Entertainment, together with our family's strong local ties, will create a dynamic alliance that gives Maryland racing an unparalleled chance to succeed in these intensely competitive times."
Karin De Francis said Magna's "business philosophy dovetails with our goals of growing and expanding the Preakness, Maryland's largest and most prestigious annual sporting event."
Alan Foreman, chief executive officer of the Thoroughbred Horsemen's Association, which has an affliate in Maryland, said horsemen would await more details from the two parties.
"At first blush, it would appear nothing is going to change," Foreman said. "They're only changing partners. It's really too early to comment until we know Magna's plans, but I'm sure there will be a host of issues of concern to horsemen."
By the numbers, Magna is the leading racetrack owner in North America. The Ontario, Canada-based company owns Bay Meadows, Golden Gate Fields, and Santa Anita Park in California; Gulfstream Park in Florida; Thistledown in Ohio; Remington Park in Oklahoma; Great Lakes Downs in Michigan; and The Meadows in Pennsylvania. Magna has agreements to purchase Lone Star Park in Texas and Flamboro Downs in Ontario.