Bid for Curlin Interest Debated in Court
by Ryan Conley
Date Posted: 11/17/2008 7:21:56 PM
Last Updated: 11/18/2008 9:55:48 PM

Curlin at Churchill Downs this past summer.
Photo: Anne M. Eberhardt

Noted Thoroughbred industry consultant Ric Waldman said Nov. 17 during a Kentucky court hearing that a $4 million offer to buy out the 20% interest in reigning Horse of the Year Curlin is “attractive” given current depressed market conditions, but the holders of the minority share feel the bid is insufficient and will attempt to derail the potential private sale.

Waldman, who has been a consultant and stallion manager for most of his 35 years in the Thoroughbred industry, testified during a nearly three-hour hearing held at Franklin County Circuit Court. Waldman explained, justified, and at times defended his $20-million appraisal of Curlin made public at the hearing, a figure which he dropped from a $30-million assessment made in August due to downturns in both the world’s economy and the Thoroughbred industry.

The Frankfort-based court for the last year has been ground zero for a legal battle over the 20% interest in the champion Smart Strike  colt, which is a high-profile component of a 3-year-old lawsuit originally filed in Boone County involving the principal minority owners, disbarred attorneys Shirley Cunningham Jr. and William Gallion. A limited liability company affiliated with Jess Jackson, a principal in 80% majority owner Stonestreet Stables, has made the $4 million offer to buy out the minority partners, a bid the receiver recently asked the court to approve.

Waldman was cross-examined on his consulting role by a court-appointed receiver, who is managing the operations of Cunningham and Gallion’s equine entity, Tandy LLC. From the witness stand, Waldman said his appraisal, which projected an initial stud fee of $75,000, was based on other factors than the economic woes striking both the world and horse industry.

“The industry is in the prime selling season for stallion season services,” he said, noting the traditional mare booking season begins in September. “Many opportunities have been lost, and the longer delays, the more will be lost in the prime selling season. He has already missed the opportunity to breed to some very good mares.”

Waldman said he considered the proposed purchase price “attractive,” given the world economy and “the unknown future of bloodstock" in the second, third, and fourth years of a stallion’s career, which often sees stud-fee declines following the first season at stud. He noted stud fees have declined this year for many prominent stallions entering their second season at stud, including some of Curlin’s racing contemporaries like Street Sense  , Any Given Saturday  , and Hard Spun  , among others.

“(The price) will allow for some sort of value at the end of four years,” he said of the private offer. “If I were Tandy, I would sell the 20% (interest) for $4 million.”

But Tandy, which does business as Midnight Cry Stable, doesn’t share that sentiment. Attorney Andre Regard, who represented Cunningham and Gallion at the hearing, said he would formally object to the receiver’s motion to sell the interest no later than the next scheduled hearing Dec. 1.

“We believe our evaluation exceeds the offer,” Regard said, declining to cite specific dollar figures. “We’re going to bring our expert on Dec. 1 and put forth our testimony and evaluation.

“My clients would prefer to get what they believe to be fair-market value or retain the (minority) interest,” continued Regard, whose clients would prefer to sell 100% of Curlin at public auction under the guidelines of a partition sale. “Perhaps given the condition of the depressed market, the better option would be to retain the interest in the long run.”

How Cunningham and Gallion would finance their 20% share of expenses in standing Curlin would appear at first glance to be challenging. The former attorneys are appealing a $42-million judgment leveled against them for the alleged mishandling of a $200-million settlement they earned for their former clients in a class-action lawsuit against the makers of the drug fen-phen. Cunningham and Gallion are also facing a retrial of a related federal criminal trial, which is scheduled to start in February 2009, also in Frankfort. The first trial ended with a hung jury reported as favoring acquittal by a 10-2 margin.

“I believe there are ways to finance the expenses related to standing a horse,” Regard said. “Our owners would prefer if Stonestreet actually approached us in some way to facilitate the standing of the horse rather than try to buy the interest.”

An attorney representing Stonestreet Stables after the hearing said he was limited in what he could say about the proceedings.

“I was very pleased with Mr. Waldman’ testimony -- it more than amply supported the receiver’s motion,” said Richard Getty, who in past court appearances has repeatedly blamed the presence of the current minority ownership as negatively impacting Curlin's career. “Because the process is ongoing, I don’t think it would be appropriate to comment on anything else.”

In a post-hearing interview, receiver Sylvius H. von Saucken reiterated what he feels are the position’s primary court-appointed responsibilities: to protect the assets of Tandy and maximize the value of the minority interest in Curlin. The Cincinnati attorney also provided some additional details of the recent sealed-bid process that failed to produce an “acceptable” bid on the minority interest.

Von Saucken said there were just two offers made via sealed-bid: one from an entity affiliated with Jackson and another party identified by the receiver only as a “major farm.” He said both bids were less than the $4 million now offered by Jackson’s entity, identified as J&B Equine Interest LLC.

“What the market said was, ‘We love this horse; we just don’t like the circumstances,’ ” von Saucken said of the sealed-bid process.

He also said a third party expressed interest, both during and after the sealed-bid process. He said the party, which he only identified as someone with minimal equine interests, never made an actual offer.

“Here you basically had an outsider saying we love Curlin, and we’d love to discuss a role that would allow us to own part of this horse,” he said, explaining that “timing” issues on the suitor’s side prevented further sale discussions.

Jackson announced Nov. 16 Curlin would stand stud at an undetermined Kentucky location in 2009, but could possibly race one more time in 2008.



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