Stronach Touches on New York, Partnership With CDI
Magna Entertainment Corp. chairman Frank Stronach indicated his company hopes to be involved in New York racing on some level, and that it also is working with Churchill Downs Inc. on projects that will benefit the two companies and the industry at large.Stronach, who also serves as interim chief executive officer of MEC, spoke during an Aug. 3 teleconference and Web cast on the company's second-quarter earnings report. He repeatedly said he's optimistic the financial fortunes of MEC are ready to turn the corner despite a large working-capital deficit and continued net loss."We have an interest (in New York) and are part of the bidding process, but we've made it quite clear the best proposal would include other partners," Stronach said. "I can't get you the details but we do hope to somehow be involved in New York racing in a minority position."The state of New York has solicited bids from parties interested in the franchise to operate Aqueduct, Belmont Park, and Saratoga. The New York Racing Association's franchise expires Dec. 31, 2007.Stronach said the partners could be real-estate concerns, casino companies, or "wealthy horsemen." He said simulcast signals from New York's major racetracks are very important to MEC, which is actively attempting to develop international platforms for United States racing."That's our primary interest," Stronach said of the actual New York racing product. "We're having conversations with a number of interesting partners."Stronach offered no details on the partnership with CDI, but said: "We're having very good dialogue now, and I'm very optimistic that over the next two months steps will be undertaken that will be good for both companies and the horse racing industry as a whole."Stronach then said offshore betting is a major concern, and that revenue must be channeled back to the U.S. racing industry.MEC will continue to sell assets and take on partners in an effort to improve its financial bottom line--"I'm very much against debt," Stronach said--and expects the sale of The Meadows in the fourth quarter of this year to help the cause. Stronach said there is "high interest" in MEC facilities that have alternative gaming or have a good chance to win approval for it.Stronach noted the developing situation in Ohio, where MEC owns Thistledown near Cleveland. Supporters of a November ballot question on video lottery terminals at racetracks and two non-track locations in Cleveland are awaiting validation of signatures.Stronach said MEC, now that potential investors "see the handwriting on the wall," would have to consider its options for Thistledown. "Do we want to get full appreciation of the property?" he said. "We'll have to play with the numbers."As for the search for a CEO, Stronach said a special committee of the board of directors is handling the process. Former CEO Thomas Hodgson left earlier this year."We have one candidate which some of the directors like a lot," Stronach said. "I think he looks OK to me."Stronach later said the preferable candidate would have experience in horse racing and gaming, or someone who is successful in business and has a love for horses. One individual on the teleconference held for analysts and investors told Stronach if investors were polled, they would want to see MEC hire someone from the gaming industry because gaming revenue eventually will dwarf pari-mutuel revenue.MEC officials said an additional $50 million in capital would be needed to build accommodations for 1,000 slot machines at Gulfstream Park in South Florida. The company already has the financing in place for the first round of 500 machines that could be operating this fall.
by Tom LaMarra
Date Posted: 8/3/2006 11:47:59 AM
Last Updated: 8/4/2006 8:51:18 AM
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