MINOR CALLS MAGNA PROPOSAL ‘PREPOSTEROUS’
Halsey Minor thought he would be meeting with MI Developments (MID) chief executive officer Dennis Mills in Baltimore, Md., on Wednesday morning to discuss Minor’s proposed buyout of the company’s $100-million loan to Magna Entertainment (MECA), the financially beleaguered racetrack company that operates Santa Anita Park and Golden Gate Fields in California, Gulfstream Park in Florida, and Pimlico and Laurel Park in Maryland, among other facilities.
When Mills failed to show, Minor called him, only to discover that Mills was still at Magna’s corporate headquarters in Canada putting out a press release outlining new loans from MI Developments to Magna Entertainment, further extensions of existing loans, and a proposed reorganization that could put the racetrack company more firmly under the control of Frank Stronach. The proposed reorganization, subject to MI Developments shareholder approval, is “an egregious attempt to hijack shareholder value and will never pass,” Minor told the Paulick Report.
Minor, a technology entrepreneur who created CNET.com among other Internet companies, is a horse owner and breeder who has also expressed interest in buying and restoring the dormant Hialeah Park in South Florida.
“He stood me up to put out this press release?” Minor said of Mills. “It might have been good to have met with me before the press release, because we have a better offer, by far, that will be far more acceptable to MID shareholders. It was a good faith attempt on my part to sit down with him and see if there was something we could do. Instead they put out this preposterous press release and he stands me up the day before Thanksgiving after I traveled all the way here to meet with him.
“I could have told Mills that what he put out, even though the stock is up a few pennies, has no chance of passing. There is a contingency (among MID shareholders) that is of the mind that says, ‘We’ll do anything to get rid of Frank,’ but this proposal doesn’t really fully get rid of him."
At least two institutional shareholders in MID, Farallon Capital Management and Greenlight Capital, have suggested possible legal action for breach of fiduciary responsibilty by MID’s board of directors over the MECA loans, one of them calling MECA a "financial sinkhole." A previous proposal to hand MECA over to Frank Stronach was voted down by MID shareholders earlier this year.
The proposal calls for a new loan from MID to MECA of $50 million to fund current operations and $75 million to pay for a possible slots license and temporary facility in Maryland, along with extensions of an existing bridge loan and of repayment deadline for another $100-million loan.
Minor insists that even if the proposal somehow gets shareholder approval, MECA will fail. “Frank doesn’t buy the stock until after the $295 million in convertible bonds are paid off,” he said. “If they are not paid, the company goes bankrupt. The slots deal in Maryland is terrible, and most of the big guys have said they are not even going to try to get the license. It’s only 33% (of revenue), versus close to 50% in Pennsylvania and Delaware. He has to spend $250 million to build his slots parlor, then give 60% of his profits to (Joe) DeFrancis (who sold his family’s interests in the Maryland tracks to Magna with a contingency for a share of any future slots revenue). So his own deal, which sucks all this money away from MID shareholders, would itself have a life of a year or two before it went under. This is Stronach’s way of saying, ‘I have this company (MID) hostage. If you want me to go away, you have to pay up.’
“The shareholders fully intend to have their day with Frank.”
Magna Entertainment (MECA) closed at $2.01 on Wednesday, up $.60, a gain of 42.8% on the day. MI Developments (MIM) gained $1.62 to close at $10.05, up 19.2%.
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Tags: dennis mills, farallon capital management, Frank Stronach, greenlight capital, gulfstream park, Halsey Minor, Magna, Magna Entertainment, Maryland Jockey Club, maryland slots, mec, meca, mi developments, mid, mid shareholders, mim, Paulick Report, Ray Paulick, santa anita, stronach, stronach group
November 26th, 2008 at 6:00 pm
I don’t get this story. It’s just the Halsey Minor Story, with no expert analysis from Ray Paulick or comments from the other side that might make it a news story. So it’s not commentary; it’s not balanced reporting. What is it?
November 26th, 2008 at 6:11 pm
Thistledown in Cleveland is an example of Magna’s failed business model….from nine months of racing several years ago will be 91 dates in 2009. And the company can set up a bowling alley on the main floor with so few patrons in the cavernous area. And wait until Gulfstream gets rolling…..the track is going to lose a number of major stables of the top trainers/owners to Fair Grounds, who will only ship in for the major stakes.
November 26th, 2008 at 6:13 pm
What is it….. It’s the truth! Stronach will keep feeding his loser enterprise cash from his Canadian holding company until the SEC or some other court stops the nefarious behavior. With his daughters political connections in Canada, he’s at least go that government on his payroll. We’ll see how he does down here where the shares of his MEC are traded.
November 26th, 2008 at 7:21 pm
Yeah incredulous, nothing newsworthy about a major billionaire’s unfettered viewpoints about a potentially shady deal involving a company that owns some of racing’s most important racetracks. Who would care about that?
November 26th, 2008 at 11:09 pm
Mr Minor, Please start your own blog so I can read about what’s got your knickers in a knot directly from you. I can’t blame the vast editorial staff of the Eclipse worthy Paulick report for publishing your ramblings, we all gotta make a buck in these troubled times, but geez man, grow up. I was with you on the Hialeah thing, but it’s starting to get tiring. We get it. You can save racing if only someone else would let you. Now I see one of the more important things in life is protecting MID investors. Very noble.
How about buying yourself some of this cheap land that’s all over the place, hunker down with your band of merry architects and roll up your sleeves and get to work. Hell, you could even buy Fort Erie for something like a dollar. You don’t know how anxious the racing community is to empty your wallet, if only you would step into the game…. Or here’s an idea, how about floating some hints on how you’d deal with horseman’s groups, ADW deals, takeout levels, synth vs dirt, etc. Those things might end up being a tad more relevant than what color the cornice over the womens outhouse is…. Just my two cent opinion (and that’s CDN dollars so it’s worth even less!)
November 27th, 2008 at 1:14 am
Gallop136, MID Matters because it controls MECA and MECA matters becuase its headed for bankruptcy. Franks shenanigans to enrich himself further using MID and MECA just means we get more of a deadlock and the same deterioration in attendance that has been the hallmark of his conquest of American tracks to date.
I care about one thing and it is none of things in your list. I want to grow audience at tracks. I am myopic and probably a little fanatical about it. I don’t give a damn about anything other than arresting the 50 year free fall in racing fans. I think its the greatest sport in the world and i want to teach others to feel the same way. And yes I do think I can do that.
EVERYTHING I do (which is much much more than you know about) is directly tied to preserving and building fans. And so I will leave takeout levels to you.
Thanks.
November 27th, 2008 at 9:59 am
Wow! Mr. Paulick…I’m impressed. Mr. Minor is watching AND replying. Sadly, it doesn’t seem that anything will truly be forthcoming from Stronach, MDI, MEC or whatever that house of cards Mr. Stronach has put together anytime soon. I guess reciprocity is not a forte of Mr. Stronach and sadly, in the short term, the racing fans and share holders will suffer. In the long run, the industry, properties (Pimlico, Santa Anita et al) and horses will possibly be bled to the point of death, with no hope of resusitation.
I have no business savy at all, but I know one can’t continue bleeding losses at this rate and stay alive. What’s going on here is Mr. Stronach’s self-will run riot to line his pockets and personal assets as much as possible before the final fall. And the government and industry regulators (boy, there’s an oxymoron for ya’) are just standing by watching this train wreck.
Good luck, Mr. Minor…especially with Hialeah. What a jewel that once was.
D. Masters
Virginia
November 27th, 2008 at 4:34 pm
Mr Minor, I wish you the best of luck. I commend you on your fanatical myopism (I guess!?) I just don’t understand the particular MEC venom. If a major problem with racing attendance is MEC, I think your giving them too much credit. Grander social forces would seem to be at play here….One of those agree to disagree things I guess.
Re: “I think its the greatest sport in the world and i want to teach others to feel the same way.”
Racings a funny sport as it really seems to stir this emotion in people. Maybe because its much more participatory on all levels than other entertainment pursuits.
The last part of your post startled me though….Leave the takeout levels to others? Your a lonely voice in the wilderness if you think the subset of fan creation can be tackled without addressing some of the other “fundamentals”…. Not saying your wrong, just that it seems … well, optimistically myopic….
“It were not best that we should all think alike; it is difference of opinion that makes horse races†MT
Good Racing
November 27th, 2008 at 7:46 pm
Fans don’t know what take out rate is. Why? They currently don’t go to tracks.
Lastly, call me when the great Canadian conquerer shuts down the American institution of the Preakness for 2 years due to bankruptcy which every one can see this is where MEC is headed if Frank doesn’t get his payoff.
I just don’t understand why he doesn’t bankrupt the tracks in his own country and let American tracks heal. This whole mess started because he did not get into the Canadian Jockey Club. So why doesn’t he destroy Candians tracks instead? Why take it out on Americas best tracks?
November 28th, 2008 at 6:01 am
Mr. Minor:
I don’t think the NTRA “really” knows what the true take out rate is, because I don’t believe they or the Feds know what the real input rate is. With all these off-shore and internet wagering sites, does anyone really know? And honestly, isn’t that what part of the problem is for the horsemen’s groups. There is no single, firm regulatory body for this industry. What a mess. Once again, technology and “creative” financial instruments are out pacing the ability of regulators to provide oversight.
As to the Preakness, rumor is that he (Stronach) has always wanted/planned to move it to Santa Anita. And if the firm goes into bankruptcy, the powers that be (whomever that is), will find a place to run that race regardless. The Preakness has not always run at Pimlico (what a dump!) nor has it been run every year since it’s inception.
Stronach’s destructive behavior vis a vis Canada v. US tracks …hmmm, I’d say because of the nature of Capitalism here in the US. Anyone with enough money can buy and wreck pretty much anything they want here…we call it “free enterprise”. But you knew that already.
November 28th, 2008 at 12:29 pm
Denise, unfortunately when a company goes bankrupt the court appointed bankruptcy administrator calls the shots and money losing businesses are usually shut down until the debts are organized and the whole lot is sold off. The Preakness would very likely not run for a period of time.
And yes I guess you are right in pointing out that American capitalism gives people from all over the world the chance to come here and run a business badly. In Hollywood they thrive off of it, French water companies, Japanese electronics manufacturers, etc. Unfortunately we didn’t figure out how to just get Frank’s money, we also got Frank and his capacity to drive down attendance almost immediately all the while stocking the bars with Frank’s Energy drink, a powerful combination of Austrian and Canadian liquid magic and Lieder Hosen girls http://franksenergy.com and firing manager after manager, executive after executive.
I have been trying to work with these guys but the actions of this last week have made me realize Frank continues to try to loot the companies he owns very little of and that they have no awareness of their culpability in the decline of their own tracks. When the ever politic (except when he stood me up the day before thanksgiving on the far side of the country) tells me that Magna Entertainment is an “enormous success” and Frank has removed every independent minded board member in favor of his childhood Austrian friends there can be no reasonable conversations with them and we are stuck with a cliche of Austrians and Canadians driving some of our best tracks into the ground or worse rebuilding them into Gulfstreams, the true vision of Frank realized.
I have given up trying to work with them before they crash. i and others will just have to do our best after they crash which seems very likely in 2009 unless Frank uses his own money which is not his style.
November 28th, 2008 at 2:23 pm
Mr. Minor:
Find a way to make Frankie work with you; even if he doesn’t want to. Because right now, by God he doesn’t have to. It won’t be easy. Same with that toad in the road down in Hialeah, but it can be done. Be patient. Revenge is a dish best served cold and with these economic times, right proposal, and capital you will find how to serve it up. Just keep your ego in check and find a way to work the system to your, and eventually racing’s benefit. In the meantime, find a PR firm (a freakin’ good one, not yes men or a money sucking machine) that will help you get more industry street cred. Many now don’t like you as the new kid on the block. Look to some of the histories of the guys that bucked the established racing system. They (the industry) are scared and worried beyond belief about their future; Stronach/MEC contributes to that. Find a way….and find way to present to Congress how to track that internet, ADW wagering money (how about a single source clearinghouse concept, regardless of the betting site for purposes of tracking…on or off shore{sole licensensing..national betting license concept}?) and placement/humane disposal of horses that don’t make the racing game. You will get their attention; albeit begrudgingly. Just one racing fan’s opinion. I think I understand what you are trying to do. I live in Virginia too via California (great TB history) and I’m so impressed with the history of these noble, courageous animals in Virginia and some of the people behind them. People just don’t know the contribution…Maryland too is superb.
When the Spring returns, you must attend a point to point in VA. I recommend Thorton Hill , Keswick and Orange Hunt races. More fan friendly and the best that true racing of TBs has to offer. But again, I’m sure you know this.
In the meantime, don’t get down. You’ve got the knowledge and business acumen to make this work. You just need to fine tune the team and timing…and get the right capital organization behind you. That last one is going to be more than tough in this global economy.
Good luck (and hang on to Fierce Wind).
November 28th, 2008 at 2:46 pm
Forgot to add, bankruptcy judges fudge and slide amoungst the rules just as much as the criminal jurists do…and attorneys always do. They can set the rules and interpretation based ON THEIR INTERPRETATION. It doesn’t mean that is the true interpretation or intent of the law; ergo the appeals process.
And I disagree with you about the Preakness. If Heir Stronach goes bust, the industry will find a way to make it happen. In fact, I think that is part of Mr. Stronach’s psychology or game plan if you will…the race will go on and he will just be another poor millionaire determined by the public to be a victim of the current state of economic affairs. In the meantime, Adena and his personal holdings based on the current corporate structure/arrangement is sucking off money to embellish his personal life and wealth. Which, btw is probably protected through trusts, tax pyramids, etc that he will never personally suffer disenfranchisment of revenue or loss of his real/personal property assets. Anybody look at that? Certainly not the SEC, FCC (airing rights) or the state of FL or KY or……