Posts Tagged ‘john magnier’

By Ray Paulick

Two years ago, leading buyer John Ferguson bought 25 yearlings during the two select sessions of the Keeneland September yearling sale for $56,885,000, an average price of $2,275,400. This year, Sheikh Mohammed’s chief bloodstock adviser signed tickets for 19 yearlings, but only spent $15,655,000, an average price of $823,947.

Sheikh Mohammed’s commitment to buying what he and his advisers think are the best yearlings hasn’t changed in two years. The competition has changed, however, leaving a very short list of people to bid against the sheikh once yearling prices get to a certain point, with $1 million seemingly the magic mark. As a result of the absence of high-pitched battles that drive prices sky-high, gross receipts and average declined during Monday and Tuesday’s select sessions, but the middle-market median price has remained the same. The high-end bubble burst also created a spike in horses bought back by consignors who seem to be clinging to the expectations set two or three years ago at this sale.

Absent from those high-pitched battles was Demi O’B yrne, representing Ireland’s Coolmore operation, which two years ago spent $8,825,000 for eight yearlings and in 2007 bought 11 for $16,850,000. Coolmore did more watching than bidding this year during the select sessions, buying only five yearlings for $2,865,000. But that might be more a product of the perceived quality of the high-end yearlings that were invited into the select session by a Keeneland inspection team that some buyers have quietly said is not doing as good a job as it used to do. We’ll see how active Coolmore is over the next two days during the Wednesday and Thursday sessions that historically have proven to provide good value to buyers and a high percentage of stakes winners that rivals the select sessions.

There were 300 horses sold Monday and Tuesday for $113,357,000, an average price of $377,857 and median of $300,000. In 2007, there were 337 yearlings sold for $145,377,000, an average of $431,386 and the same $300,000 median. Thus, the gross dropped by 22% in one year, and the average declined by 12.4%. There were 132 horses through the ring that failed to sell, a buy-back rate of 30.6%, an all-time high for the Keeneland September select sessions.

The two-year drop is even worse. In 2006, the select sessions produced $182,860,000 in revenue for Thoroughbred breeders on the sale of 324 horses, an average of $564,383, the highest-ever in September. That year’s median was also $300,000. So the two-year drop in revenue is 38% and the average has fallen 33%.

This year’s select sale gross is the lowest since the $100,576,000 achieved in 2002 and the second-worst since 1999. That’s especially bad news for breeders whose product is produced for the high-end buyer in the Thoroughbred market. But it’s also bad news for Keeneland, a sale company that has had a dominant market share position on its chief rival, Fasig-Tipton, which was purchased earlier this year by an associate of Dubai’s ruler, Sheikh Mohammed.

The purchase of Fasig-Tipton, combined with a commitment by its new owner to recapitalize the company and turn loose its newly crafted management team will pose a serious challenge to Keeneland moving forward, and begs the question: Can anyone teach the elephant to dance?

Tuesday’s sessions yielded more $1-million yearlings than Monday’s (11 to 5, as reported by the sale company), but the total is far below the 30 sold last year. The session totals were: 146 sold for $57,310,000, an average of $392,534 and median of $300,000. The Tuesday session in 2007 sold 166 for $77,982,000, an average of $469,771.

Over the first two sessions, Ferguson, representing Sheikh Mohammed, and Rick Nichols, buying in the name of Sheikh Hamdan’s Shadwell Estate Co. Ltd., combined to spend more money in 2008 than they did in 2007: $25,375,000 vs. $22,380,000. Their combined purchases accounted for 22.4% of the select session gross receipts.

The 2008 declines would have been far worse were it not for a new operation, Legends Racing, a partnership formed by Gaines-Gentry Thoroughbreds, that was the third leading buyer behind Ferguson and Shadwell with 10 yearlings bought for $6,655,000. Another significant domestic buyer was Peter Wittmann’s Maverick Racing, which spent $3,100,000 on five yearlings to rank fourth among select session buyers.

The top-price of the select sessions was the $3.1 million Storm Cat filly sold Monday and purchased by Ferguson for Sheikh Mohammed.

Though Storm Cat produced the top price, A.P. Indy was the leading sire by average, with 21 sold for an average of $647,142. Here is Keeneland’s list of leading sires.

Taylor Made Sales Agency was the leading consignor by gross revenue, with 74 yearlings bringing $25,690,000, followed by Lane’s End, which sold 24 for $14,520,000. Here is Keeneland’s list of leading consignors by gross and by average.

One horse Lane’s End didn’t sell was a colt by Storm Cat out of the multiple Grade 1 winner Tranquility Lake, who produced Grade 1-winning grass star After Market for breeders Marty and Pam Wygod. The colt was part of the Lane’s End consignment and was widely believed to be a potential sale topper when it was announced he had been withdrawn about an hour before he was scheduled to be sold on Tuesday.

As the action was winding down late Tuesday afternoon, Marty Wygod and Russell Drake, farm manager for the Wygods, were puffing on what looked like victory cigars behind the Keeneland sale pavilion. After seeing the results of the first two days, Wygod said he was happy with the decision to keep the Storm Cat colt and race him rather than offer him in a shaky market, saying: “There’s just not enough money out there right now for this kind of horse.”

Copyright © 2008, The Paulick Report

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Thoroughbred breeders are on pins and needles in the days leading up to the bellwether sale that determines the state of the commercial market and the financial well-being of thousands of people engaged in the business of breeding, raising and selling racehorses.

There is always an air of uncertainty as the Keeneland September yearling sale approaches (it begins Monday), but this year the sense of anxiety seems heightened; 2008 has been a virtual perfect storm of bad news that has affected the world economy, financial markets and the racing industry in a variety of ways. Even the normal bright spots – the Triple Crown and race meetings at Keeneland, Saratoga and Del Mar – have come down with a case of the blahs.

Here’s a quick review of some of the major race meetings and big days in 2008:

- Gulfstream Park’s total handle was down 5%; on-track betting plunged 30%

- Keeneland’s spring meet saw an increase in attendance but a curious decline in wagering of 5%

- Saratoga, plagued by bad weather early in the meeting, ended up down 10% in total handle and minus 7% on-track

- Kentucky Oaks wagering was down  7%

- Kentucky Derby wagering dropped 2.5% despite having the second-largest on-track crowd ever

- Preakness handle fell 16%

- Belmont Stakes handle was the lone bright spot in the Triple Crown, increasing by 32% as a result of Big Brown’s attempt to win the Triple Crown

- National handle is down 3.7% for the first six months of 2008

- Spending at 2-year-old sales is down roughly $13 million from 2007 despite solid results at OBS auctions; the high end of the market (Fasig-Tipton and Barretts) suffered the most

- Gross receipts for North American yearling sales going into Keeneland’s September auction are down $20 million from 2007

Some of the wagering declines are due to ongoing disputes involving the Thoroughbred Horsemen’s Group (representing horse owners) and TrackNet Media (the joint venture of Churchill Downs and Magna that negotiates simulcast contracts). Those disputes have affected account wagering handle, in some cases shutting it down almost entirely.

The overall mood for racing has been in a season-long slump, due to several factors.

The most obvious is the long-overdue recognition that medication issues are responsible for increasing skepticism among both fans and industry professionals over whether the sport is being played on a level playing field. The admission by trainer Rick Dutrow that Kentucky Derby and Preakness winner Big Brown raced on anabolic steroids exposed one of racing’s dirty little secrets; namely, that too many therapeutic medications, including steroids, are permitted. Getting rid of steroids has proven to be a very painful and public process, but progress is being made.

The breakdown and subsequent euthanasia of Eight Belles immediately after she finished second in the Kentucky Derby was as high-profile a blow as the sport has had since Ruffian’s death in her 1975 match race against Foolish Pleasure. It appeared to be a case of bad luck and nothing more, but that hasn’t diminished the negative publicity the event attracted.

The Congressional hearings in June that exposed racing’s lack of a central authority and its inability to deal with drug and safety issues further diminished the sport in the public eye. At least it spurred some to action, including the Jockey Club, Thoroughbred Owners and Breeders Association and National Thoroughbred Racing Association, which all created special committees to examine issues and make industry-wide recommendations that no one may be able to enforce.

Compounding the issues that are challenging the sport is the absence of any effective industry-wide effort to attract new investors as end users for the horses produced by breeders. The ranks of breeders and sellers continue to grow as racing becomes less viable economically. A number of prominent buyers in recent years are shifting to the selling side of the ledger, leaving a void among people willing to spend substantial amounts of money on racing prospects. This reduced population of top-level buyers figures to make the high end of the yearling market susceptible, particularly if the two parties who have traditionally been the leading buyers, Sheikh Mohammed’s Darley and John Magnier’s Coolmore operation, do not bid head-to-head on the same yearlings.  And questions remain about how the Dubai purchase of the Fasig-Tipton auction house will affect Sheikh Mohammed’s spending at Keeneland.

Ultimately, Keeneland is the world’s largest yearling auction, and buyers from around the globe will show up and spend hundreds of millions of dollars before this sale is over Sept. 23 after a 15-day run. The question is how close will they come to the $385 million spent at Keeneland in 2007.

 

Ten questions about the Fasig-Tipton sale of select yearlings that begins tonight at the Humphrey S. Finney Sales Pavilion in Saratoga Springs, N.Y.?

Question 1: Now that Fasig-Tipton is owned by an associate of Sheikh Mohammed of Dubai, will the sheikh’s chief bloodstock agent, John Ferguson, be more active than he has been in recent years? Ferguson was leading buyer in 2007, purchasing five yearlings for $3,675,000, which represented less than 10% of the sale’s $41,082,000 in gross receipts. Will that percentage go up this year?

That nearly $3.7 million was more than Ferguson spent in the three previous Saratoga auctions (he bought five for $3,275,000 in 2006, three for $1,650,000 in 2005, and one for $275,000 in 2004).

Question 2: How will the Dubai-based ownership play out with  Sheikh Mohammed’s global rival, John Magnier’s Coolmore team, which has outspent Ferguson over the last four years at Saratoga and been the sale’s leading buyer? Led by agent Demi O’Byrne, Coolmore has spent $12.2 million since 2004 compared with $8.9 million for Ferguson and Sheikh Mohammed.

Last year, O’Byrne signed tickets on three yearlings for $1,455,000, five in 2006 for $3,100,000, three in 2005 for $4,850,000, and four in 2004 for $2,800,000.

Which leads us to the next question.

Question 3: Will Ferguson and O’Byrne hook up on the most desirable yearlings in the Saratoga catalog? Oh, for the good old days when the two rival camps when at it unflinchingly, driving prices and profits up for breeders. The absence of those titanic bidding wars has made a difference at Saratoga and elsewhere, as has the avoidance of Ferguson’s bids on yearlings bred by Coolmore associates or sired by their stallions.

Question 4: Will the weak dollar bring an influx of foreign buyers to offset the soft world economy and unsteady investment markets? The buying activity of Ferguson and O’Byrne largely drive the foreign spending percentages tracked by the trade publications, but will there be any second tier support from others in either Europe or Asia to help strengthen this sale?

Question 5: Will a new player show up, or will an existing owner in the business step up, to provide additional firepower to a market that can always stand an infusion of new money? Team Valor has jumped up as an important buyer of high-end yearlings at Saratoga the last couple of years. Will that partnership operation or others like it end up on the leading buyer’s list in 2008?

Question 6: Can the federal government’s Economic Stimulus Act, passed earlier this year, provide enough incentives for American buyers to increase their bloodstock investments? The new law included two important tax incentives allowing much bigger tax write-offs for horses: first, with an increase of the expensing allowance from $128,000 to $250,000 for horses purchased and put into service this year; and second, a 50% first-year bonus depreciation for horses and other depreciable property purchased this year.

Question 7: Was the alarmingly high buy-back rate of 38.8% at Fasig-Tipton Kentucky’s July yearling sale a case of unrealistic expectations by consignors, a sub-par group of yearlings, or a symptom of an ailing economy that deterred buyers and will influence all bloodstock markets this year?

Question 8: Will Jess Jackson feel any backlash over his crusade for transparency and reform in the auction marketplace when he offers his first (albeit small) yearling consignment under the Stonestreet banner? Jackson’s methods and comments stung some people in the business, and it will be interesting to follow how his first consignment goes.

Question 9: Will the Fasig-Tipton promotion to pay 2009 stakes nomination and entry fees for 2-year-old graded stakes races at Saratoga for graduates of this sale be enough of an incentive to attract more New York-based stables as Saratoga buyers? Good move by the two companies to work together and a sign that Fasig-Tipton’s new ownership will be thinking of creative new ways to promote their sales.

Question 10: Who among the strong group of first-year sires will emerge as the commercial market leader going into next month’s market-defining yearling sale at Keeneland? The list includes Afleet Alex (three);  Ghostzapper (seven catalogued); Rock Hard Ten (four); and Saint Liam (four).

Copyright © 2008, The Paulick Report

Consignors and buyers attending Fasig-Tipton yearling sales in Lexington, Ky., and Saratoga Springs, N.Y., in July and August may be a little disappointed if they are looking for a sudden transformation of the 110-year-old Thoroughbred auction company under the new ownership of Dubai-based Synergy Investments.

The sale, announced in April, closed May 30. Synergy is headed by Abdulla al Habbai, an associate of Sheikh Mohammed al Maktoum of Dubai’s ruling family and the owner of the worldwide Darley racing and breeding operation.

“The upcoming sales will be extremely similar to 2007 and the years prior to that,” said Boyd Browning, Fasig-Tipton’s chief operating officer. “It might seem a little boring right now. Everyone wants to know what we are going to do differently. There is a sense of raised expectations in the market place, and that’s a positive thing. We’re really revved up, but we’re not there yet.”

In fact, Browning said he’s had just one meeting with a representative of Synergy in London the week after the deal closed. There have been no personnel changes, and none are anticipated in the near future. Budgets for recruiting and marketing remain what they were prior to the sale. Fasig-Tipton had been owned by a group of Thoroughbred industry breeders led by John Hettinger.

 “The marching orders (from the initial meeting) are to develop ideas,” Browning continued. “We don’t have a ‘formalized plan’ yet. We’ll do a review of the company, what we can do better and what types of things can we be involved with that can help the industry overall and the sales industry. We’re in the brainstorming stage now. We hope to have more definitive ideas in 60 to 90 days.”

Browning said he’s been pleasantly surprised by an outpouring of ideas from people in the industry.

“I’ve got a folder full of emails with suggestions,” he said. “Some people have their own personal agenda, but many others have some very creative ideas. We’ve got an opportunity to think outside the box and get people engaged.”

A survey of more than 30 Fasig-Tipton consignors and buyers by the Paulick Report found widespread  though not unanimous enthusiasm for the new ownership and what it can bring to the auction marketplace and the Thoroughbred industry.

Asked to rate the sale of Fasig-Tipton on a scale of 1-to-10, with one being extremely bad news and 10 extremely good news, respondents answered with an average of 8.1. The median rating was 9. Only two respondents answered with a rating below 5.

Comments on the sale were virtually unanimous in support of increased competition being good for any industry, including Thoroughbred auctions. Currently, Keeneland enjoys roughly an 80% to 20% market share lead over Fasig-Tipton in the $1-billion annual Thoroughbred auction market. There have been repeated rumors over the years that Keeneland would buy out Fasig-Tipton, but that never happened, perhaps to the regret of Keeneland’s  current board and management team. At the time the sale to Synergy was announced, Keeneland president Nick Nicholson issued a terse statement that said only: "The purchase opens a new chapter for an historic, well-established company in the Thoroughbred auction business."

Respondents to the Paulick Report survey  were assured their comments would remain anonymous unless they specifically gave approval to be named. All but one chose to remain anonymous.

“I hope the sale inspires Keeneland to treat their customers better,” said one bloodstock agent.

“The sale (to Synergy) is good for the industry and good for Fasig-Tipton, provided there is no hidden agenda,” a major buyer and consignor commented. “Being this is the second-largest sale company, it’s going to put Keeneland on its toes. They both need to be more customer centric, and more customer service oriented. They should do some of the things to attract and retain customers. Keeneland has been arrogant. They’ve had a monopoly virtually. If Fasig-Tipton steps it up a level or two, I think it will only improve Keeneland’s customer service focus. Good competition is good for the industry.”

“Keeneland is a company that doesn’t treat its consignors that well,” said a major Kentucky breeder. “So it will be interesting to see how they respond to the increased competition. They have operated like some pre-Teddy Roosevelt high-handed monopoly. The question will be: Does Keeneland have the talent and ability, the corporate mentality, to compete in the real world.  American capitalism does not allow sacred cows to stand alone in fields by themselves eating all the hay.”

“What excites me most,” said a Kentucky horseman, “is that it’s my understanding that Sheikh Mohammed wants to see things done to promote and grow our industry. One only needs to take a look at a before and after picture of Dubai to see he knows how to make things happen.

“This will probably make Keeneland step up and get active as well. I have never seen a time where the status quo was less acceptable in our industry. It is time for people to get with the program!”

While Sheikh Mohammed has not officially been linked with Synergy Investments, nearly everyone polled suggested that he was at least partially behind the purchase. His chief bloodstock agent, John Ferguson, negotiated the purchase on Synergy’s behalf.

“(Sheikh Mohammed) is definitely involved,” one horseman said. “There is no question about that.”

Said another: “I see no downside that would cause any worries (unless one is a shareholder in Keeneland). The positives are that this group, apparently and hopefully, will be applying the same intensity and energy into the commercial arena as they have applied to stallion management and marketing. Further, I imagine they will probably be recruiting new buyers and participants to become involved through 1) their Middle Eastern contacts and 2) incentives and encouragement to all purchasers (particularly trainers and other end users via hospitality and purchase incentives).”

One consignor said he does not believe Sheikh Mohammed has any intent to hurt Keeneland. “He simply wants to improve the economic state of affairs within the North American side of our industry,” he said. “He has a ton of money invested here and our prosperity is important to him. “My understanding is that he plans to use this purchase as a platform to launch innovative approaches to attract new buyers.”

Another breeder cited the new structure of Fasig-Tipton’s ownership as a plus. “The purchase takes Fasig out of a business model that is predominantly aimed at cost control and providing profits to distribute to a small handful of shareholders. This establishes a new business model that will have increased focus on customer appreciation and service, with capitalization to develop many new customer friendly initiatives. It has the potential to be a competitive threat to Keeneland, and increase competition almost always benefits the consumer. It should also lead to initiatives that bring more high-end clients to the sales and into the business. Basically, the possibilities are mostly limited by the imagination of the individuals in charge of designing and implementing.”

“Nothing but good can come from this sale,” said another consignor. “F/T has always been the ‘Avis’ of the equine sales companies where they ‘try harder,’ and the ‘product’ they produce is with less capital than their competitor. Keeneland does an excellent job; however, healthy competition is always good. F/T now has the capital to compete head to head with their competition, which should make a win/win for everyone.”

“What excites me,” said another, “is the injection of large amounts of cash, if necessary, in a contracting breeding/racing environment. ‘Doing it right,’ regardless of cost, will take precedent over profit.”

Another breeder said the sale has “enormous potential. It can be very significant or a non event. The potential to revitalize racing and selling is immense if the commitment is there. I have no worries about this sale unless they under deliver on the expectations the industry has for the new company. Unlimited funding, not just market driven. What an opportunity.”

Some were more guarded in their comments, listing potential negatives.

“Possible downsides include unknown effects, if any, of having one faction seeking to dominate the American horse scene,” said one consignor. “I’m not too worried, because I think the American breeding, racing, and sales scene is too broad and multi-faceted, and enough competition will always exist for one group to dominate enough to cause serious negative effects. (The situation is unlike that of the Jockey Club which negatively affects the industry because it is a monopoly without competition.)”

“Main concerns would be major changes in strategic direction and/or management,” said another.

“It might not be the best thing for so much of the industry to be under the control of one entity,” said one bloodstock agent. “That said, they put up the money so more power to ‘em. If the Arabs let it be known that they will support their sale and no longer buy at Keeneland, then it could have a significant impact on where consignors send their horses. If nothing else, I hope the sale makes Keeneland more user-friendly.”

“I am concerned that the ultimate goal may be domination in the market place,” a consignor said.

Said another: “I have been told (which means nothing, as we know), that the group behind Synergy are not fans of how things are done at Keeneland. So I’m guessing that this is a beginning process to eventually have more power than Keeneland does in the sales world."

“Nothing about it excites me,” said breeder Garrett Redmond. “My worry is: If it is profitable and profits are shipped to Dubai, more of our patrimony is exported to an OPEC member. That cartel is already taxing us into depression and poverty.

“There is one way it might help sellers,” Redmond added, “but I know it will not be done. With the huge capital at its disposal, FT could pay sellers on the day following the sale instead of the waiting period there is now. That alone would be a huge blow against Keeneland; the kind of competition we need to take Keeneland down a few pegs.”

Several horsemen contacted by the Paulick Report brought up the feud between Sheikh Mohammed’s Darley operation and the Coolmore camp led by John Magnier and the team that includes Demi O’Byrne and Paul Shanahan.

“Coolmore bought and sold a lot of horses with Fasig-Tipton, and there is the fact that Sheikh Mohammed doesn’t buy Coolmore horses or Coolmore-bred horses,” said one breeder. “I’m not sure how that is going to play. Would Coolmore have the same kind of relationship with Fasig-Tipton that they’ve had before? That’s still to be panned out.”

Browning addressed the question directly. “We’ve tried to be proactive with Coolmore and Darley. Both camps have been important customers of Fasig-Tipton and the overall industry. We’ve had a longstanding relationship with Coolmore, especially with Demi and Paul, and we’ve tried to make every effort to encourage them and assure them that we want to continue those relationships. It’s important for the industry.

“Competition is good and good for all of us,” Browning continued. “We want a competitive environment where we have both sides on the same horse. We want them both to be completely comfortable buying and selling horses at Fasig-Tipton. We are striving to do that. I can’t say that it’s going to be a success or failure.”

For now, Browning is hoping the industry has some patience as new plans are formulated.

“Rome wasn’t built in a day,” he said. “This transaction closed May 30. Our perspective is to make the game better and the sales better on a long-term basis. We want to do the right thing consistently and for the long term. It’s not very glamorous or exciting, but we are more interested in where we’ll be in five years, not five months.”

By Ray Paulick

Copyright ©2008, The Paulick Report