Magna has eye on Md. tracks

Pimlico, Laurel fit expansion profile for racing conglomerate

Horse Racing

March 08, 2002|By Jon Morgan | Jon Morgan,SUN STAFF

Will Maryland's racetracks be the next to join the rapidly expanding Magna Entertainment empire?

Magna, a Canadian-based racing conglomerate, announced Wednesday the purchase of Lone Star Park near Dallas for $80 million in cash and the assumption of a $19 million capital lease.

If the deal is approved by regulators, Lone Star will become the 11th pari-mutuel track bought by Magna in a little more than three years. Magna president James McAlpine said yesterday that the company is actively looking at three or four more tracks to buy.

He wouldn't identify them, but executives for Magna have been in discussions with the owners of Pimlico Race Course and Laurel Park, according to several industry sources familiar with the talks. Attorneys have exchanged documents, though no deal has been completed.

Joe De Francis, principal owner of Pimlico and Laurel, known collectively as the Maryland Jockey Club, has acknowledged getting offers from suitors. He has declined to identify them with one exception.

Churchill Downs Inc., owner of the Kentucky Derby and the only other racing conglomerate on the same scale as Magna, made an offer, but the talks ended weeks ago, De Francis said.

Churchill executives would not comment. But they concluded that rival Magna was poised to acquire the Maryland tracks by offering more money, according to industry sources.

De Francis has said that investors have approached him about a minority share, now held by a New York-based investment company, Leucadia National Corp. De Francis wants to see that stake sold because his relations with the company have soured. But most of the potential buyers end up seeking a controlling share, he has said.

That would apparently include Magna, which prefers 100 percent ownership. "We're not looking to be minority partners," McAlpine said yesterday in a conference call with reporters.

Lone Star Park, in Grand Prairie, Texas, was opened in 1996 by investors who secured the license after beating other bidders, including a consortium that included De Francis.

Magna is raising cash to buy more tracks and related businesses by selling real estate and issuing stock.

Among those it is interested in is Suffolk Downs in East Boston. Officials with that track have publicly acknowledged being close to a deal in which Magna would lease and operate Suffolk Downs.

Magna envisions a future in which more fans will bet on televised, or "simulcast," races from remote sites - something that already accounts for more than 80 percent of the racing industry's business - or over the telephone or Internet.

So far this year, Magna has unveiled two initiatives catering to at-home bettors. On Jan. 25, it launched a national telephone-betting service called "XpressBet" formed from Ladbroke Racing Corp., a Pennsylvania-based service that Magna bought two years ago. Magna announced Feb. 1 a joint venture with the operators of Philadelphia Park to broadcast races to customers of a $100-a-month dish-TV service, "Racetrack Television Network."

Magna-owned tracks now account for 26 percent of the money wagered on thoroughbred racing, a figure McAlpine said the company wants to reach 40 percent. This would boost revenues derived from its simulcast signals sold to other tracks and attract more viewers to the new TV network.

With the operation of two of the nation's premier winter-season tracks - Santa Anita near Los Angeles and Gulfstream Park outside Miami - Magna is especially interested in tracks that offer summer racing.

"We're looking basically to fill out our schedule over the year," McAlpine said.

The company also likes to buy tracks in large population centers and to add amenities such as shopping and restaurants, he said. The company has invested $45 million in upgrades at Santa Anita and has announced plans for multimillion-dollar improvements to Gulfstream, including a new simulcast-only area.

"Our view is you have to put some money into the business if you are going to bring fans back," McAlpine said.

Magna has been criticized for not completing promised improvements at Santa Anita, and for a bad start of the current meet at Gulfstream, where fields have been thinned by Magna's decision to increase the number of racing days from 62 to 90. McAlpine said the company needs time to complete its plans and to get regulatory approvals.

He said Magna is interested in the opportunities of alternative gaming, such as slot machines, but is focused chiefly on racing. Some tracks have added slot machines, devoting a portion of the proceeds to race purses and facilities.

"We don't believe it's necessarily true that the only savior for racing is slot machines at the race tracks," McAlpine said.

Magna's strategy calls for increasing the sport's meager customer base, now estimated at about 3 million core fans, by improving tracks and using technology to reach more people.

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