Magna Entertainment Corp. has agreed to sell Flamboro Downs, a Standardbred racino in Ontario, Canada, to Great Canadian Gaming Corp., a casino company that continues to add racetracks to its portfolio.
Great Canadian would pay MEC $50 million Canadian ($40 million) and another $23 million in cash for Flamboro Downs, which offers live year-round harness racing and operates four off-track betting parlors near Hamilton, Ontario. Flamboro also has 752 slot machines and ranks third among Ontario racinos in revenue, according to MEC.
Great Canadian would acquire all outstanding shares of Ontario Racing Inc., a wholly owned subsidiary of MEC. The sale is subject to regulatory approval and due diligence.
MEC acquired Flamboro Downs for $47 million, according to a release issued in 2002 when the plan to purchase the harness track was announced.
"We are pleased to establish a relationship with Great Canadian and we look forward to developing a long-term relationship to the mutual benefit of both our companies," MEC chief executive officer Thomas Hodgson said in a release. "We have agreed with Great Canadian that we will continue to have the use of the Flamboro signal, and we will work with them to include other Great Canadian tracks within the MEC distribution network.
"Flamboro is a great track with excellent people, but its divestiture allows MEC to focus resources on a strategic goal of delivering prime racing content, developing our U.S. gaming potential, and expanding our signal delivery and wagering capability within North America and internationally."
Great Canadian is based in British Columbia, Canada. Last year, it purchased several racetracks in British Columbia, including Hastings Park, a Thoroughbred track, and two harness tracks--Fraser Downs Racetrack and Casino and Sandown Park. The company also purchased Georgian Downs Raceway and Slots, which is located in Ontario north of Toronto.
"We see Flamboro as an excellent fit for our company as we continue to expand into the central and eastern regions of Canada," Great Canadian chief operating officer Anthony Martin said. "We are excited about the mutual benefits of a relationship with MEC."
MEC officials have indicated there could be changes as the company looks to shore up its bottom line. MEC is in line to operate slots in Florida at Gulfstream Park, which is being rebuilt from the ground up, and also plans to focus on expansion of its simulcast network.
Company officials, during a May 3 teleconference to discuss first-quarter earnings, said MEC would continue with its plan to reduce operating costs, sell some assets, and seek partnerships in an effort to restructure its balance sheet. In terms of total capitalization, MEC had $568 million in equity and $528 million in long-term debt as of March 31.
The net loss for the first quarter of this year was $4.1 million, compared with net income of $21 million for the same period in 2004.