Magna Reportedly Close to Deal With Maryland Jockey Club

Magna Entertainment could complete a deal to buy Pimlico Race Course and Laurel Park within the next several weeks, according to a report by the Washington Times.

The $105 million deal involves all the assets owned by Maryland Jockey Club, which also owns the Bowie Training Center and three off-track betting parlors. Minority partners Leucadia National Corp. and horseman Lou Guida, who have been looking over the past year to sell their interests, have also agreed to sell to Magna.

Maryland Jockey Club president Joe De Francis told the Times he was negotiating with Magna but decline further comment because of a non-disclosure agreement. Magna, a Canadian-based racing conglomerate controlled by Frank Stronach, regularly declines to comment on all pending contracts and acquisitions. Jim McAlpine, Magna's president and chief executive officer, has said on several occasions that the company intends to buy three or four racetracks this year. The company has a deal pending to acquire Lone Star Park near Dallas for $80 million cash and $19 million in debt.

"We will continue to pursue strategic acquisitions and make strategic investments in our racetracks and related operations, including entertainment operations, to grow and enhance our racing business," McAlpine said recently.

The Times said sources close to the Maryland Jockey Club deal said the price has been settled, but the future roles of De Francis and his sister, senior vice president Karin De Francis, remain the biggest obstacles yet to clear. Joe De Francis is reportedly demanding an active role on the board of directors, but has agreed to allow Magna to hire a management team for daily operations.

If an agreement is reached, the deal requires approval from the nine-member Maryland Racing Commission. Commissioner Terry Saxon has already state publicly that he and at least three other commissioners would oppose a sale after watching the poor performance this year at Magna-owned Gulfstream Park in Hallandale, Fla., one of the premier winter tracks. Gulfstream's average on-track handle was down 18%, the total handle was down 13.5%, and average field size dropped 7.5%.

"Why would Maryland approve an operator that runs a premium race track into the ground?" Saxon told the Washington Post in late March.

The Maryland Jockey Club has negotiated with both Magna and Churchill Downs, a rival conglomerate based in Louisville, over the past six months. Churchill ended its talks in February when the price had gotten too high, according to the Times.

Maryland racing industry leaders told the Times they thought the price was $25 million more than the timeworn racetracks are worth. Joe De Francis has said the cost of renovating the tracks would be more than $100 million and the Maryland Jockey Club is carrying about $19 million in debt.

Magna may be willing to pay a premium on the chance that the Maryland Legislature will allow slot machines at racetracks within the next two years. Maryland tracks have pursued slot machines for years, but Gov. Parris Glendening has been an ardent opponent. The state, however, elects a new governor in November and slot machines are expected to be a major legislative issue in January regardless of who is elected. Democratic candidate and Lt. Gov. Kathleen Kennedy Townsend opposes slot machines, while her rival Baltimore Mayor Martin O'Malley and Republican frontrunner Robert Ehrlich Jr. support slots.