Magna Entertainment Corp. and Colonial Downs, L.P. announced Thursday they have entered into an agreement under which Colonial LP will acquire all of the outstanding shares of Maryland- Virginia Racing Circuit, Inc., a subsidiary of Magna Entertainment.MVRC has operated Colonial Downs, a Thoroughbred and Standardbred track in New Kent, Virginia, pursuant to a management agreement with Colonial LP since April 1996. This management agreement is MVRC's sole material asset. The sale is subject to approval of the Virginia Racing Commission, which approval the parties intend to request at the Commission's next regularly scheduled meeting on Sept. 7, 2005. Under the terms of the agreement, Colonial LP will pay MEC, through its subsidiaries, $7 million on closing and $3 million by way of a one-year interest-bearing demand note.
Colonial LP will also pay MVRC's pro-rated 2005 management fees and repay approximately $145,000 plus accrued interest under an existing outstanding promissory note. MEC will further participate with Colonial LP in certain new ventures in Virginia, if and as they materialize."We have enjoyed a lengthy and productive relationship with the team at Colonial Downs but this sale of our management arrangement will enable us to continue to refocus our 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," stated W. Thomas Hodgson, president and chief executive officer of MEC. "We have agreed with Colonial LP that we will continue to have the use of the Colonial Downs signal and we hope to include that signal within our growing domestic and international distribution network."Jeffrey P. Jacobs, chairman of Colonial LP, said, "We are appreciative of MEC for their hard work in helping to grow Colonial Downs and we look forward to a continued relationship with them and to building on the foundation that has been laid."