De Francis has no plans to sell stock Says court ruling doesn't let Manfusos force a buyout

August 11, 1993|By Ross Peddicord | Ross Peddicord,Staff Writer

Is anyone ready to play Russian roulette -- with racetracks?

Now that a Baltimore City Circuit Court judge has declared that a disputed buyout clause between the estranged partners of Pimlico and Laurel race courses is valid, is either side ready to trigger a deal to buy out the other?

Under a provision made four years ago in a stockholders agreement between majority owner Joe De Francis and his minority partners, Bob and Tom Manfuso, either side may offer its share for sale at any price after Oct. 1, 1993. The other side either must buy at that price or sell its shares. This is known as a "Russian roulette" provision, because the side that triggers the measure in an attempt to take over risks losing its share.

But there are some important features to the clause: Action is not mandatory; no one has to trigger a deal. Additionally, nothing in the agreement prohibits either side from bringing in new partners to buy the shares that are being liquidated.

De Francis said yesterday that he is standing firm in his position as controlling owner of the two tracks.

"I'm the decision maker," he said. "They [minority partners, the Manfusos] can trigger the deal by making an offer for my shares. But then it's my choice to respond. I have all the options. The only thing the Russian roulette clause does is allow them to set a price. I can match it if I feel it's reasonable. Or if it's unreasonable, I could decide to sell. But it's my choice."

Tom Manfuso said: "This is no ordinary buy-sell agreement. Once one party makes an offer, you then assume a certain exposure."

Yesterday, Manfuso said he and his brother are "working up numbers in preparation for Oct. 1. By that, I mean we are sending someone in to try to understand the value of the tracks. We haven't been involved actively in their management since 1990, and a lot has changed since then.

"I think either side has to be ready to respond if someone wants to trigger the deal. I believe in being prepared. I can't imagine Joe De Francis will ever trigger [because he already controls the majority of the stock], but you can never say never. As of this stage, I can't say whether we will or not."

De Francis added yesterday that the Russian roulette clause has been "mis-characterized as a battle for control of the track. This is not a fight where you can force someone to sell through coercion. This simply means one side either has the ability to liquidate or to buy. If the Manfusos are the triggering party, then it is my option to buy their shares, or alternatively, to allow them to acquire my shares."

De Francis said yesterday he feels that Judge Ellen I. Hollander was wrong in deciding that the Russian roulette clause is valid after the Manfusos initiated lawsuits that he believes breached a standstill provision in the original stockholders agreement. He said he plans to appeal Hollander's decision.

De Francis, his sister, Karin Van Dyke, and Marty Jacobs, executive vice president and chief counsel for Pimlico/Laurel, own 53 percent of Pimlico's stock, 25 percent of Laurel's. He said the Manfusos own 47 percent of the equity in Pimlico, 25 percent of Laurel. The Guida group owns the other 50 percent equity in Laurel.

When De Francis' father, the late Frank De Francis, purchased the tracks in partnership with the Manfusos in the mid-1980s, they paid $30.5 million for Pimlico and $16 million for Laurel, borrowing $41 million that is still listed as debt.

* De Francis said yesterday that he plans to appeal five citations for safety violations issued against the tracks by the Maryland Occupational Safety and Health Administration this week.

"We have an annual operating budget of $40 million, and we're talking about $30,000 in fines," De Francis said. "But obviously the safety of our employees is a high priority, and we're taking these charges seriously. We do plan to contest them."

Lenny Hale, vice president of racing at Pimlico/Laurel, said improvements have been made since the April 1 morning training accident when the horse, Fox Brush, was electrocuted at the auxiliary starting gate and his exercise rider injured. Hale said it is now standard policy to unplug and roll up a battery cable that charges the gate whenever the starting device is in use. He said that the United Starting Gate Co. is responsible for maintenance of the gate.

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