The Maryland Racing Commission voted unanimously Nov. 13 to approve Magna Entertainment Corp. as majority owner of Laurel Park and Pimlico Race Course, turning the spotlight on Magna to begin fulfilling its promise for Maryland racing. The Preakness Stakes, second leg of the Triple Crown, is a big part of the equation.
"We're purchasing a majority interest in the Maryland Jockey Club because of the Preakness," said Jim McAlpine, president and chief executive officer of Magna. "It will become the crown jewel of Magna Entertainment. We plan to continue running it at Pimlico. Maryland and the Preakness will be a very, very important piece of our game plan."
When the deal closes, the country's three top racetrack operations will each have a leg of the Triple Crown. Churchill Downs Inc. has the Kentucky Derby, and the New York Racing Association has the Belmont Stakes.
The nine-member commission enthusiastically endorsed Magna's agreement to buy 51% of the Maryland Jockey Club in a deal valued at $117.5 million. Lou Ulman, commission chairman, proclaimed it "the dawn of a new era in Maryland racing."
Combined with the election Nov. 5 of Robert Ehrlich Jr. as governor, it could be. Ehrlich supports slot machines at Maryland tracks. Mired in gloom a few months ago, Maryland racing suddenly faces the prospect of slots as well as a wealthy owner that pledges dramatic track improvements.
The Canadian-based Magna, the largest owner of racetracks in North America, has vowed to revitalize Maryland racing by transforming tracks into entertainment centers, upgrading stable areas, providing friendly service, and offering a wide distribution of Maryland races for betting via telephone, television, and computer.
Though Magna owns or has deals pending to buy 14 racetracks, and is building a track in Austria, McAlpine, said Maryland and the Preakness would be Magna priorities.
After hearing Magna's commitment, commissioner John Franzone said: "Let's just rock 'n' roll. Let's go."
During an interview this summer at Saratoga, Frank Stronach, chairman of Magna, said he plans on tearing down Pimlico after the 2003 Preakness and rebuilding it from the ground up. Stronach didn't attend the Nov. 13 meeting, but McAlpine said Magna still plans on rebuilding Pimlico--not for at least three years.
In the meantime, he said, Magna will spend at least $10 million in each of the next three years on upgrades at Pimlico, Laurel Park, and the Bowie Training Center. He declined to offer specifics.
McAlpine acknowledged that the possible legalization of slot machines in the upcoming legislative session complicates efforts to devise specific plans now. If the legislature approves slots at racetracks as governor-elect Ehrlich wants, Magna would have to incorporate slots casinos into its plan for Pimlico and Laurel Park.
McAlpine said he views slots as a "short-term consideration" that would help Maryland racing keep pace with tracks in neighboring states that have them. In the long term, he said, racing needs to expand its fan base and improve the distribution of its races so it can stand on its own.
Joe De Francis, president and chief executive officer of the MJC, will continue as head of day-to-day operations. He and his sister Karin, an MJC executive vice president, will retain 49% ownership of the tracks.
Magna will pay Karin and Joe De Francis a total of $1.6 million at closing as well as $9.2 million each for the right to buy them out in four years. If Magna exercises that option, it would pay the De Francises an additional $18.3 million at that time.
Magna will pay $49 million to the tracks' minority owners, Martin Jacobs, the Laurel Guida Group, and Leucadia National Corp. Then, those three minority owners and Karin and Joe De Francis will become partners in a venture that would reap a percentage of slots proceeds if the machines are installed at Pimlico and Laurel Park.
The Magna-MJC deal must now be approved by the Virginia Racing Commission at its Nov. 20 meeting. Virginia commissioners must approve it because the Maryland-Virginia Racing Circuit, which manages Colonial Downs and its off-track-betting centers, is a subsidiary of the MJC.
De Francis and McAlpine said they expect to close the deal in late November or early December.
Though Stronach didn't attend the meeting because of a commitment in Europe, his daughter, Belinda, did. She is president and chief executive officer of Magna International Inc. She told commissioners that the acquisition of Pimlico, Laurel Park, and especially the Preakness goes a long way in helping Magna Entertainment achieve its goal of becoming "the world's number one electronic sports, media, wagering, and entertainment company."