Slots tracks' golden draw

De Francis attracting offers largely because of legalization hopes

Horse Racing

Analysis

February 23, 2002|By Jon Morgan | Jon Morgan,SUN STAFF

On the face of it, Maryland's thoroughbred racetracks would seem a poor investment. Profits are meager, fans scarce and the buildings beset with problems - such as grandstand windows at Laurel Park that pop out of their frames.

So why are Laurel and its sister track, Pimlico Race Course, drawing interest from some of the biggest and most successful names in racing?

A big factor, of course, is the looming issue of slot machines. If permitted at the tracks, they would result in a deluge of revenue. The chances, though still iffy, could improve next January when the term of resolutely anti-slot Gov. Parris N. Glendening expires.

Other forces are also at play, some as simple as the national prominence of the Preakness Stakes, run each May at Pimlico, and others more complicated, such as an industry-wide consolidation of tracks driven by the booming business of telecasting races to off-site gamblers.

"They hold the thoroughbred license in a very populous area," said Bob Leffler, a sports marketing consultant whose clients include the tracks, known collectively as the Maryland Jockey Club.

Malcolm Commer, equine economist at the University of Maryland, said assigning a value to the tracks involves making a number of assumptions about future government policy on everything from slots to whether a costly training center in Bowie can be shuttered.

A financial expert familiar with the tracks, who spoke on the condition of anonymity, said they could be worth $100 million to $150 million today - and twice that if slots are legalized.

Owner Joseph De Francis this week said he has received inquires from "substantial entities," including Churchill Downs, Inc., which owns the Kentucky Derby and a number of tracks. He said the talks with Churchill had ended with no deal, and declined to identify other suitors.

Canadian-based Magna Entertainment, which operates Santa Anita Park in California and Gulfstream Park in Florida, has, in the past, expressed interest. One source familiar with Magna's operations, who spoke on the condition of anonymity, said Magna sent representatives to Maryland a month or so ago to explore a purchase.

Churchill launched a similar expedition in December, but failed to convince De Francis to sell more than a minority stake. Churchill president Thomas Meeker tried to revive the talks personally in a meeting with De Francis in Maryland a few weeks ago.

De Francis has said he is not interested in selling control of the tracks, but speculation has centered on Magna or another operator agreeing to retain De Francis and his sister and track co-owner Karin, in management - something that might change the equation.

Some in the industry - pointing to frustration directed at De Francis in the legislature - hope he sells a controlling share now. A new operator may have a better chance of cajoling aid from lawmakers.

"Rightly or wrongly, the perception of Joe is negative, and if you have somebody come in who is a clean face and with no axes that have been ground, it could help win support in Annapolis," Commer said.

Both Magna and Churchill operate television networks that beam their races to bettors at other tracks and, in some cases, in their homes through special racing channels. The Maryland tracks would provide either operator with a year-round menu of racing.

De Francis is trying to find a buyer for the minority stake in his firm now owned by a subsidiary of Leucadia National Corp., a New York investment firm with which he is now feuding.

Most of the suitors offer, instead, to buy a controlling share, said one source familiar with the process.

William Rickman Jr., the co-owner of Delaware Park who has obtained a license to build a new track in Western Maryland, said yesterday that he has not been approached, but has no interest in investing in the De Francis tracks.

"I don't think anyone wants to be a minority partner. It doesn't make sense," Rickman said.

De Francis' original partners, brothers Tom and Bob Manfuso, who owned the tracks along with De Francis' late father, sold out after an acrimonious legal fight. The Leucadia relationship also has soured.

Leucadia declined to comment.

But the Leucadia share can't be sold without the approval of both Leucadia and De Francis, and the New York investors have every reason to refuse. If the state legalizes slot machines at the tracks, it would prove lucrative to Leucadia, which paid almost $15 million in 1998 for about half the non-voting stock in Pimlico and Laurel.

De Francis, too, is almost certainly waiting to see what happens with slots. The tracks have said for years that they need the devices, now found at competing tracks in West Virginia and Delaware, to raise money to keep the business afloat and finance improvements.

Racing interests are betting the issue will reappear as a way to help Maryland meet an expected $1 billion budget shortfall.

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