- The Washington Times - Friday, May 17, 2002

BALTIMORE The nation's largest racing company is close to an agreement to buy Maryland's thoroughbred tracks, including Pimlico Race Course, in a deal worth about $105 million, The Washington Times has learned.
Magna Entertainment Corp., which owns 10 tracks in the United States, could complete the deal to purchase the Maryland Jockey Club in several weeks. The Maryland Jockey Club owns and operates Pimlico Race Course, which plays host to the Preakness Stakes, and Laurel Park, as well as the Bowie Training Center and three off-track betting parlors.
Magna, an Ontario-based corporation led by industrialist Frank Stronach, has long coveted the Maryland tracks. The firm appears to have outlasted Churchill Downs, the company that owns the track that plays host to the Kentucky Derby, in its bid to acquire the racecourses.
Maryland Jockey Club President Joe De Francis confirmed yesterday that the talks are taking place, but he said he could not comment further because of a non-disclosure clause in the negotiations. Magna officials, who regularly decline to comment on potential purchases until a deal is completed, would not confirm the talks.
However, sources close to the talks said the sale price has been agreed upon and that the future roles of Mr. De Francis and his sister, Senior Vice President Karin De Francis, are the biggest obstacle remaining to the completion of the deal. Joe De Francis is demanding an active role on the board of directors, though he has agreed that Magna would be allowed to choose its own management for daily operations. Negotiations have reached the due-diligence phase, according to sources.
The Maryland Jockey Club has negotiated intensely with both Magna and Churchill Downs during the past six months. Deals appeared to be close with each group at times, but Churchill Downs pulled out of the running in February because the bidding had gone too high. Minority partners Leucadia National Corp. and horseman Lou Guida, who have sought a buyer for their stakes during the past year, also would sell to Magna.
The nine-member Maryland Racing Commission must approve the deal. One member recently said he was against a sale to Magna. The tracks must give the panel 15 days' notice, but a transaction is likely to take several months to complete after an agreement is reached, and the sale would be contingent on getting the commission's approval.
The Maryland Jockey Club is attractive to both Magna and Churchill Downs, which are competing to buy tracks nationwide to become the leader in simulcast wagering. Indeed, Magna plans to start a national cable racing network.
Magna owns several major tracks Santa Anita Park in Arcadia, Calif., and Gulfstream Park in Hallandale, Fla., for example and has an $80 million deal pending to buy Lone Star Park in Dallas. The company recently announced plans to spend $273.9 million for acquisitions.
"We're continuing to pursue strategic acquisitions and make strategic investments to enhance our business," Magna said of its expansion plans in a release.
Mr. Stronach repeatedly has said he would like to buy the Maryland tracks, especially to gain Pimlico's Preakness Stakes. The Maryland Jockey Club owns the the Preakness Stakes, the middle jewel of horse racing's Triple Crown. However, the race can't be sold or moved out of the state without legislative approval. The state also would have first right to buy the 127-year-old race before it could be sold to another track.
The $105 million price tag is $25 million more than many Maryland racing leaders believe the two aging tracks are worth. Joe De Francis has said that more than $100 million is needed to modernize the facilities. The Maryland Jockey Club also carries $19 million in debt.
Magna's overpayment is an investment in the possibility that slot machines will be allowed at the tracks in the next two years. Slots are expected to be a major legislative issue in January, regardless of who is elected governor in November. Democratic Lt. Gov. Kathleen Kennedy Townsend opposes slots, and Republican front-runner Robert L. Ehrlich Jr. and Democratic rival Martin O'Malley, the mayor of Baltimore, support them.
Slots would be worth hundreds of millions of dollars annually, money that would be shared by the tracks and the state. Racetracks in Dela-ware and Charles Town, W.Va., went from shuttered to stunning success during the past seven years after beginning the use of slots.
Maryland tracks long have lobbied for slots, but outgoing Gov. Parris N. Glendening consistently has opposed them. However, horsemen and track officials believe a change at the statehouse eventually will provide passage for a slots measure.
"I wouldn't say it's win or lose next year and it's over forever," Joe De Francis said. "I think next year will be very important."

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