Posts Tagged ‘annual breeding rights’

The retirement of reigning Horse of the Year Curlin to Lane’s End Farm may be one of the more unusual stallion contracts with which the Versailles, Ky., farm’s owner, William S. Farish, has been involved. Farish said as much in an interview with the Paulick Report, although he would not go into details of the deal that was announced on Nov. 21.

Farish confirmed that Lane’s End did not purchase any interest in the Smart Strike 4-year-old colt, who will stand for $75,000 live foal as the property of Jess Jackson and the Midnight Cry Stable – at least until Midnight Cry’s 20% ownership interest is resolved in a legal battle that goes back to a 2001 diet-drug class-action settlement. The case revolved around the legal fees charged by plaintiff attorneys William Gallion and Shirley Cunningham, among others. The two men, who raced under the Midnight Cry stable and bought Curlin as a yearling for $57,000 in 2005, lost a $42 million judgment in a civil suit and face retrial on criminal charges of mail fraud after a previous trial ended in a hung jury. A third defendant was acquitted.

A court-ordered receiver has been charged with selling Midnight Cry’s 20% interest in Curlin, but the fair market value of the horse is in dispute. At a recent hearing, bloodstock consultant Ric Waldman estimated Curlin’s total value at $20 million, meaning Midnight Cry’s interest is worth $4 million – the amount Jackson and his wife, Barbara Banke, offered to buy it. Andre Regard, an attorney for Midnight Cry, said the figure is too low.

Because of the legal complications, it’s believed Jackson was unable to convey any breeding rights to Lane’s End, a standard part of most stallion contracts that gives the farm standing a horse a minimum of four to six annual breeding rights. In lieu of those rights, the assumption is that Jackson is paying Lane’s End an annual management fee, in addition to standard marketing and board fees. Unless the management fees are linked to Curlin’s stud fee (i.e., they increase if his stud fee increases), Lane’s End will not enjoy the potential upside it would if the farm owned shares or a percentage of the horse, or if the farm received a specific number of annual breeding rights.

Regard said he has requested a copy of the stallion contract from Jackson but has yet to receive it. He suggested the details of the contract could help establish Curlin’s true value. Regard contends that the $20-million appraised value is too low, based on the multiple of 267 times the initial $75,000 stud fee. Some stallions are valued based on a multiple of 400 (or even as high as 500) times the initial stud fee, Regard said.

Farish admitted the negotiations over Curlin were “difficult” because of the legal challenges. That Jackson and Farish ended up business partners on the horse is viewed by some as ironic, in light of Jackson’s crusade to reform the Thoroughbred auction business and his push to have bloodstock agents licensed. It is widely believed the politically-connected Farish used his clout in Kentucky’s legislative circles to restrict reforms and block the mandated licensing of agents.

Curlin was retired following his fourth-place finish in the Breeders’ Cup Classic, the only time in 16 career starts he finished worse than third. North America’s all-time leading earner, with $10,501,800 won in the United States and Dubai, will make a final public appearance this Saturday at Churchill Downs before joining his sire, Smart Strike, at Lane’s End.

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