Penn National close to divesting stake in Md. Jockey Club

Penn wants to resume live racing at Rosecroft

May 17, 2011|By Hanah Cho, The Baltimore Sun

Penn National Gaming said Tuesday that it is getting close to reaching an agreement to divest its stake in the Maryland Jockey Club, which operates Laurel Park and Pimlico Race Course, the home of the Preakness Stakes.

Eric Schippers, a spokesman for Penn National, said final details are being worked out with Canadian real estate company MI Developments, the Jockey Club's majority owner.

The two owners, which at times have appeared at odds on racing issues, have been in talks since early this year to restructure their joint venture to own and operate the tracks.

Penn National bought a 49 percent stake in the Jockey Club last year in hopes of securing a slots license at Laurel Park, but those efforts failed when Anne Arundel County voters affirmed the Cordish Cos.' plans to build a casino at Arundel Mills mall. Penn National owns Hollywood Casino Perryville, which has generated $64 million in gross revenue since opening in September.

In the meantime, Penn National bought bankrupt Rosecroft Raceway for $11 million in February with plans to restart live racing and lobby for slots there, where machines are not authorized under the state's slots program.

The casino operator filed an application this month to resume live harness racing at the Prince George's County track by the end of the year.

On Tuesday, Penn National executives provided an update on the company's plans for Rosecroft before the Maryland Racing Commission, whose approval is required. The commission has not yet scheduled a hearing to consider the application.

Steve Snyder, Penn National's senior vice president for corporate development, asked commission members for a quick resolution so the track can start rehiring employees who were laid off when Rosecroft closed last year.

Penn National has started a nearly $1 million project of renovation and demolition work to prepare the racetrack for reopening, Snyder said.

Penn National hopes to run at least 20 days of live racing this year at Rosecroft as well as to broadcast standardbred and quarter horse races. Snyder says Penn National could bring back 20 to 25 employees for this year's limited season if the application is approved.

Next year, Penn National wants to hold 54 days of live racing and expand simulcasting to include thoroughbred races. But that depends on whether Penn National can strike a deal with the Jockey Club and thoroughbred horse owners and breeders.

Simulcasting revenue has been a sore point among Rosecroft and the Jockey Club, the Maryland Thoroughbred Horsemen's Association and the Maryland Horse Breeders Association. Rosecroft stopped paying millions in fees to the parties in 2009, saying that the agreement was no longer affordable for the money-losing operation.

A new simulcast deal is also required for the Jockey Club to be eligible for slots subsidies approved by state lawmakers in April. The legislation requires the parties to agree to arbitration if an agreement is not hammered out by Oct. 1.

Alan Foreman, an attorney for the Maryland Thoroughbred Horsemen's Association, said the parties cannot have a "meaningful conversation" over simulcasting issues until Penn National's ownership conflict of interest is addressed.

The bill requires Penn National to recuse itself from negotiating on behalf of the Jockey Club on the Rosecroft deal or to sell its stake in the Jockey Club.

Schippers said after the racing commission meeting that negotiations to sell its interest in the Jockey Club are "nearing the finish line."

"Hopefully, we will have more to say on that soon," he said without giving a specific timeline.

MID shareholders and key regulators recently approved a proposal that would transfer the company's racing assets to its chairman and chief executive, Frank Stronach. Stronach would take the racing operations, including the Jockey Club, private under the deal, which is expected to close in late June.

Whether Penn National sells its stake to MID or to Stronach directly depends on the timing, Schippers said.

Officials with MID could not be reached for comment Tuesday.

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