Posts Tagged ‘Frank Stronach’

Drew Couto, president of TOC, confirmed Wednesday night that the owners’ organization has filed an intention to bid on Santa Anita but would not offer any additional comment. It is not known if there are individual investors behind the proposed bid or if the funding would be institutional.

The paperwork filed with the expression of interest to bid on Santa Anita is only the first step in the process. TOC will then have to be ruled as a “qualified” bidder after Miller Buckfire and Co., the bankruptcy specialist firm handling the sale of the Magna tracks, reviews its application. The deadline for expressing an interest in bidding was May 27, and formal bids must be submitted by July 31. If necessary, an auction on the properties may take place in September. (Click here for more information on bankruptcy bidding processes.)

There have been many rumors circulating through Southern California that another bidder for the track represents Chinese interests. Internet entrepreneur Halsey Minor has also expressed an interest in acquiring some of the tracks through the purchase of Magna Entertainment’s accumulated debt. MI Developments, which like Magna Enterainment was a spinoff of the automotive giant Magna International, submitted a “stalking horse bid” for a number of the tracks in the original bankruptcy filing in March. Since then, however, MI Developments, the largest shareholder in Magna Entertainment, has backed away under the threat of litigation from many of its institutional shareholders.

There are profound fears in the California Thoroughbred community that if Santa Anita is sold to a development company, racing in the Golden State would soon be extinct. Bay Meadows racetrack in Northern California has been torn down for future development by the Bay Meadows Land Co., which also owns Hollywood Park, where plans for mixed-use development could kill live racing at the end of this year. If Santa Anita is sold for development purposes, the only major track remaining in Southern California would be the  Del Mar, which races from mid-July to early September. Gov. Arnold Schwarzenegger has listed Del Mar, which is owned by the state of California, as a potential property the financially troubled state may attempt to sell.

A successful bid by TOC on Santa Anita Park could go a long way toward preserving the California racing industry.

Magna Entertainment also owns Gulfstream Park in Florida, PImlico and Laurel in Maryland, Golden Gate Fields in Northern California, Lone Star Park in Texas, Remington Park in Oklahoma, Thistledown in Ohio, and Portland Meadows in Oregon.

Santa Anita Park, which opened in December 1934, was purchased by Magna chairman Frank Stronach for $126 million in 1998.

TOC was incorporated in 1993 and eventually replaced the California Horsemen’s Benevolent and Protective Association as the recognized organization representing horse owners in the state.

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The process began on Monday, May 4, when stallion and foal nominators could begin nominating candidates to run for 13 openings on the 48-person Breeders’ Cup board of members and trustees. By now, nominators should have received a letter from the Breeders’ Cup with a customer login and passcode to access a secure voting website that will be open for one week until May 11. Individuals must receive a minimum of 50 votes to be nominated (one vote is assigned for each foal nominated to the Breeders’ Cup and one vote for each $500 in stud fees for nominated stallions). There are 39 elected positions on the board of members and trustees, each with three-year terms, and 13 positions are up for election every year. The other individuals on the board of members and trustees are founding members of the Breeders’ Cup, past presidents and corporate officers.

When nominators go to the voting site, they should have access to a complete list of nominators and the total votes each nominator is eligible to cast. The disclosure of the nominators and number of votes is new to this year’s election.

The next step (from May 12-15), following the closing of nominations, is tabulation of the list of nominees. Individuals that received the required 50 votes are sent a consent form and will be requested to provide a short biography and suitable photo.

On May 18, True Ballot, a company that specializes in elections for labor unions, professional organizations, etc., mails nominators a letter with customer login and password information for secure online election voting. Nominators may request a paper ballot if they prefer.

Voting for the members and trustees election is open from June 1-15 among all nominators to the Breeders’ Cup program.

Following are the 13 members and trustees whose terms are expiring this year: John Amerman, Boyd Browning, Alice Chandler, Donald Dizney, Tracy Farmer, Tom Ludt, Clem Murphy, B. Wayne Hughes, Ogden Mills Phipps, Dan Pride, Richard Santulli, John Sikura, and Frank Stronach. These members and trustees whose terms are expiring are automatically re-nominated unless they opt out of the election.

On June 22, True Ballot will report the results of the members and trustees election and Breeders’ Cup will publish the results. Those results won’t be made official, however, until the annual meeting of members and trustees is held on July 9, and the candidates with the most votes are put up for election by the existing members and trustees. Prior to the vote at the annual meeting, according to section 4.2 of the Breeders’ Cup bylaws, nominations from the floor can also be made by members and trustees.

All members and trustees wishing to be candidates for two-year terms on the smaller board of directors have until 5 p.m. on June 30 to submit their names to Jim Philpott, the Breeders’ Cup corporate secretary. While the election for those open board positions (there are six this year) is conducted during the July 9 annual meeting of members and trustees, individuals unable to attend may vote through the election web site or via proxy, provided the member holding the proxy reveal the identity of each proxy he or she has received at the annual meeting. Each member is entitled to vote for up to six candidates.

The six board members whose two-year terms expire in July are: Reynolds Bell, Don Dizney, Tracy Farmer, Don Robinson (who is serving the remainder of the term of B. Wayne Hughes, who resigned from the board in January), G. Watts Humphrey, and Robert Manfuso. There are 13 elected board members, plus Breeders’ Cup president/CEO Greg Avioli.

Breeders’ Cup will publish the results of the board election, including votes, at the conclusion of the July 9 meeting.

Officers are elected at a subsequent meeting of the newly elected board of directors. According to Breeders’ Cup bylaws, no individual may serve more than five consecutive years as chairman or vice chairman of the board. Bill Farish of Lane’s End Farm is in his third year as chairman.

In a memo to the Breeders’ Cup members and trustees, Farish outlined the changes to this year’s election (publication of vote totals by nominator, full election results, on-line voting for both elections, proxy procedures, and officers electing to abstain in board of director election). “These changes to the election procedures are intended to provide full transparency to all nominators and ensure confidence in the election process,” Farish said in the memo.

The changes were requested by members and trustees who felt previous elections lacked sufficient transparency.

Additional changes have been requested, including amendments to the bylaws that would eliminate voting in the election for the board of directors by current officers (they have voluntarily abstained from the upcoming election); voting in the board of election by past presidents (James E. Bassett III and D.G. Van Clief Jr.); and voting in the board of election by founding members of the Breeders’ Cup, some of whom are no longer active in the Thoroughbred industry.

I’ll have my own thoughts on the Breeders’ Cup election process in a follow-up commentary tomorrow.

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The anticipated offer comes at a time when opposition to MEC’s plans to auction some of its assets is mounting from both creditors and shareholders in MI Developments, MEC’s parent company. According to a published report, the creditors have focused on the control that Eclipse Award-winning owner and breeder Stronach wields over not just MEC, but MI Developments. MI Developments, in addition to being the largest shareholder in MEC, is a major creditor that in the bankruptcy filing made a stalking horse bid for some of MEC’s assets. The court-appointed committee of creditors charged the proceedings are “overrun with serious conflicts of interest.”

This is not the first time Minor has made a run at MEC. Last October, the founder of the Internet company CNET proposed to the MI Developments board of directors that he would buy the outstanding loans from MID to MEC. That offer was not accepted, but now that the company has entered chapter 11 bankruptcy proceedings it has far less wiggle room.

“The goal would be to take control of the Magna tracks away from MI Developments and begin the process of rebuilding much of what has been harmed over the previous five years," Minor said in October. "Magna Entertainment, as a company, clearly has little chance of survival. The idea is to prevent a bankruptcy which would be disastrous for the industry and to begin to rebuild the company. The goal, first and foremost, is to stop the uncontrolled bankruptcy, which is almost inevitable. You can’t lose $120 million a year in this environment and continue.

“Frank Stronach only owns 2% of MI Development but has been using that company to prop up Magna Entertainment, which has basically been a bankrupt company for three years. It only exists because MI Developments continues to put money into a company whose losses are in excess of $100 million a year.

Magna filed bankruptcy on March 5. Click here for the history of the company and here for a list of its major creditors.

Farallon Capital Management, which in October called Magna Entertainment a “financial sinkhole,” filed a letter with the Securities and Exchange Commission on Tuesday that called for the Magna Developments board to foreclose on loans made to the racetrack company if they are not repaid on the accelerated March 20 due date. Half of Magna Entertainment’s $600 million in debt is owed to Magna Developments, and the racetrack company has lost $500 million over the last five years, according to the Farallon letter. Farallon owns 5.5% of the company’s Class A shares. Click here for the Farallon letter to the Magna Developments board.

“Given the (MIM) board’s history of failing to defend MIM’s contractual rights against MEC, we are greatly troubled by the press release’s silence on whether MIM will enforce MEC’s debt obligations when they come due,” the letter states. “Bankruptcy would allow MIM to realize at least some value on its loans to MEC.”

The Farallon letter calls it “folly” that current market conditions justify providing additional financing to Magna Entertainment. “There is no realistic prospect that MEC will ever be financially viable,” it states. “That the (MIM) board has authorized over $300 million in loans in a failed attempt to prop up this equity only highlights the foolishness of the two companies entanglement. There is no possible justification for MIM to deepen that entanglement by lending more money to, or accepting equity in, MEC.”

Frank Stronach is chairman of both Magna Developments and Magna Entertainment.

“If MEC fails to repay the loans as scheduled, MIM should not waste a single day waiting to exercise its rights as a creditor,” the letter states. “Any other course of action would be a dereliction by the (MIM) board of its fiduciary duties. Farallon is watching the board closely. We are prepared to vigorously protect our rights as a shareholder if the board does not fulfill its fiduciary duties in the weeks ahead.”

The Farallon letter  comes two weeks after another unhappy institutional shareholder, Greenlight Capital, wrote to the Magna Developments board saying they will be held responsible for any failure to live up to their fiduciary duties. Click here for that letter.

More bad news for Magna: just last week, Jerry Campbell, a former CEO of Magna Entertainment, resigned from the MEC board.

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Random notes while waiting for the ice to melt …

The devastating snow and ice storm that hit Kentucky earlier this week has created serious economic hardships on Thoroughbred farms, many of which are without electricity and have suffered major damage, just as the foaling season is hitting full swing and the breeding season about to begin. Let’s hope organizations like the American Horse Council, the NTRA, Thoroughbred Owners and Breeders Association, the Kentucky Thoroughbred Association and the Kentucky Equine Education Project are in contact with government officials to seek relief, now that Gov. Steve Beshear has asked the Obama administration to declare a federal emergency.

Horse farms are already under extreme economic pressure because of the plunge in bloodstock prices, and this latest problem is only making things worse for them. It’s at times like these that these alphabet soup organizations can actually do some good.

DID FRANK STRONACH’S ONE-VOTE MARGIN over IEAH Stables in the Eclipse Awards outstanding owner category come by virtue of several racing secretaries who work for him? I have a great deal of respect for Stronach’s racing and breeding operation, which has produced solid numbers for many years now, but I just can’t fathom how 2008 was an Eclipse Award-winning year for him.  Ahmed Zayat’s stable earned slightly more money but only ranked sixth in the number of first-place votes. IEAH had a far superior year in terms of Grade 1 winners. George Strawbridge’s Augustin Stable had a better year when the number of starters was taken into consideration, as did the racing stables associated with Sheikh Mohammed. Here is the year-end ownership standings by money.

Apart from the National Turf Writers Association, which has historically published how its members vote, there is no disclosure from Daily Racing Form or the National Thoroughbred Racing Association about who votes – never mind who each individual votes for. But the NTRA should insist that racing secretaries or any other voters who work for racetracks owned by Stronach’s Magna Entertainment not be allowed to vote in categories where there is a potential conflict of interest. That would include the leading owner and leading breeder categories. The awards are too important to permit any conflicts of interest or suspicions of impropriety.

In the owner and breeder categories (the latter of which was for years determined by a committee vote), there seems to be little imagination or thought put in by voters, who more often than not look at which owner and breeder is at the top of the money list that is supplied with the ballot. If the people who vote for Academy Awards were that lazy, then “Paul Blart: Mall Cop” would win the Oscar for best picture this year.

Opportunity (the number of starters) should play a role in voting for outstanding achievement by an owner or breeder. Twice in the last eight years, a breeder who produced two individual champions in the same year from a small band of broodmares (Virginia Kraft Payson, with Farda Amiga and Vindication in 2002, and Aaron and Marie Jones, with Speightstown and Ashado in 2004) did not even get enough votes to be among the three finalists! That’s insulting to the thousands of Thoroughbred breeders who either can’t afford to or don’t choose to maintain massive numbers of broodmares.  (Click here to see what I wrote about this issue a few years ago at Bloodhorse.)

The NTRA needs to address this, either by eliminating the vote and simply giving the awards for leading owner and breeder to whoever wins the most money, or by changing the system of selecting the outstanding individuals in these two categories. I don’t think enough voters understand the importance of this category or what “outstanding” means when it comes to owning or breeding Thoroughbreds.

SPEAKING OF THE NTRA, what is its future? The organization is a shell of its former self, when it had widespread industry support and a mission to improve the economics of racing and breeding through increased pari-mutuel handle, marketing and greater exposure on television. Following its split from the Breeders’ Cup, the NTRA has lost much of its economic clout and influence, as it no longer has the annual championships to promote to the general public or to race sponsors that were tied in to group purchasing (i.e., John Deere, NetJets, Dodge), which only a few years ago produced upwards of $100 million a year in sales. Following the NTRA-Breeders’ Cup “divorce,” group purchasing through NTRA Advantage has dropped significantly.

Today, the NTRA seems to be playing more defense than offense, reacting to crises (i.e., the death of Eight Belles in the Kentucky Derby, Congressional inquiries, totalizator problems) but not really having the resources to go on the offensive in any areas, including marketing and promotion.

Complicating matters (and this isn’t new) is the ongoing struggle to maintain membership in the NTRA. Churchill Downs Inc., which is tabbed to pay approximately $400,000 in dues for its various tracks in 2009, hasn’t recommitted to membership. A source says Churchill might considering paying $200,000 in dues.  An NTRA official told the Paulick Report he hopes Churchill executives see value in the NTRA’s legislative activities, the “Racing to the Kentucky Derby” television series on ESPN, NTRA Advantage purchasing, the National Handicapping Championship, and the Safety and Integrity Alliance. The interesting thing about the latter, I’ve been told by sources, is that Churchill Downs CEO Bob Evans is the one who insisted the NTRA do something about the safety issues that led to the creation of the Safety and Integrity Alliance.

Magna apparently hasn’t committed to renewing its NTRA membership, either. If the NTRA loses the two largest track ownership companies, it will be further weakened, perhaps terminally.

CORPORATE SPONSORSHIPS ARE A CHALLENGE in the current economic climate, whether it’s the PGA Tour, NASCAR or horse racing. But it was, nevertheless, a surprise to see Bessemer Trust drop its sponsorship with the Breeders’ Cup. I would think the wealth management firm formerly chaired by Ogden Mills (Dinny) Phipps and now run by his cousin, Stuart Janney Jr., is encountering the same economic challenges that many financial institutions are (though Bessemer’s investment strategy is believed to be conservative).  

Janney responded to an email with the following comments: “I would say our reasons for dropping out are as follows. First, we have been a sponsor for some time, which means many of our clients have been entertained at a Breeders’ Cup event and having them back again is possibly less appealing than providing a different venue. Second, the two-day format works better for others than it does for us. Third, we have never been able to really derive full value from the TV ads as our target audience is very narrowly focused. Fourth, as we look at other sponsorships and ways to thank our clients or meet prospects, it helps in tighter times to have this money available. We believe our involvement with the Breeders’ Cup has been beneficial to Bessemer and the staff at the Breeders’ Cup has been a pleasure to work with.”

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Inquiring minds may want to know…will Michael Iavarone of IEAH Stable have more bodyguards than Jess Jackson? How big will Frank Stronach’s posse be? Who will take the first punch at the publisher of the Paulick Report? Iavarone (I’m no fan of his), trainer Steve Asmussen (I wrote that no trainer with a pending drug positive deserves an Eclipse Award) or my former boss, Bloodhorse publisher Stacy Bearse (who needs no further introduction to our faithful readers)? We’ll try to answer those questions and more, going behind the scenes as best we can.

Many of the Eclipse Award winners are obvious (both of the 2-year-old divisions, 3-year-old male, older male and female, jockey and trainer), but there actually is suspense in several categories (3-year-old filly, male and female turf, male and female sprinter, owner and breeder). Unless, of course, someone at the sponsoring organizations – the National Thoroughbred Racing Association, Daily Racing Form or National Turf Writers Association – has leaked the results, something that has happened in the past.

Without access to the leaks, here are my predictions for the night (on the Eclipse Awards front):

2-year-old male – Midshipman (a slam dunk)

2-year-old filly – Stardom Bound (should be a unanimous vote)

3-year-old male – Big Brown (there might be a few stragglers that voted against him)

3-year-old filly – Proud Spell over Eight Belles (performance should win out over sentiment)

older male – Curlin (slam dunk)

older female – Zenyatta (should be unanimous, though I am reminded that some sports writers didn’t vote for Rickey Henderson to get in the Baseball Hall of Fame)

male sprinter – Midnight Lute (if it’s like boxing, the defending champion should have an advantage, and we’re like boxing, right?). This may have been Bob Baffert’s best training achievement in his career (and he could have three Eclipse winners this year without being a finalist for outstanding trainer!)

female sprinter – Indian Blessing over Ventura (the anti-synthetic track votes may come into play here, diminishing Ventura’s win over Indian Blessing in the Breeders’ Cup)

outstanding owner – Unimaginative voters will probably give this to Stronach Stable, based on the highest earnings (though the 2008 leading owner by money won was Zayat Stable, who was not a finalist). Of the three finalists (Sheikh Mohammed’s Godolphin Racing is the third), IEAH deserves the award if it is strictly based on racetrack performance

outstanding breeder – tough one to call. Adena Springs has the numbers, but the other finalists, Stonerside and WinStar, had very good results from smaller foal crops. With Robert and Janice McNair producing two Breeders’ Cup winners (Midshipman and Raven’s Pass) for Stonerside, they get the nod

trainer – Steve Asmussen, an outstanding horseman and the certain landslide winner (though as I stated in an earlier column, I believe medication positives during the year in question should disqualify individuals or horses from awards consideration)

jockey – Garrett Gomez. Another landslide

apprentice Jockey and steeplechase horse – no clue

Horse of the Year – Curlin, by a comfortable margin…a deserving two-time champion

Tune in to the Paulick Report later tonight to see how wrong I can be!

UPDATE: Due to multiple braincell failure, two hotly contested categories were omitted from the original post.

male turf — Einstein over Conduit. A season of top performances in North America should rate higher than a single Breeders’ Cup win.

female turf — Forever Together (for the same reason as Einstein, even though Goldikova’s BC Mile triumph was nothing short of breathtaking.

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