Posts Tagged ‘Magna Entertainment’
Tuesday, September 30th, 2008
By Ray Paulick
Shares in Magna Entertainment (MECA), the debt-ridden racetrack operating company controlled by Frank Stronach, plunged by 56% in Tuesday’s trading on the NASDAQ exchange. Closing at $1.75 per share (down from $4.00) under extremely heavy trading (more than 30 times higher than the daily average), MECA was NASDAQ’s biggest percentage loser on a day when the Dow and NASDAQ each gained between 5%-6%.
MECA stock has plummeted by 91% in the last 52 weeks, and its market capitalization has shriveled to less than $10 million.
Magna Entertainment has listed debt of $571 million. The company recently announced 30-day extensions on a loan maturity date from a Canadian bank and an $80-million bridge loan from its affiliated real estate company, MI Developments, that will be due Oct. 15 and Oct. 31, respectively, along with a $100-million payment due MI Developments Oct. 31. Major shareholders in MI Developments have fought extensions of the bridge loan and repayment. On Monday, John Barnett resigned from the board of MI Developments. The company’s CEO, John Simonetti, stepped down in August and was replaced by Dennis Mills, a longtime Stronach ally.
The current bank and credit crisis only heightens the gravity of Magna’s poor financial health.
Magna Entertainment operates, among other tracks, Santa Anita Park in Southern California, the site of the 2008 and ’09 Breeders’ Cup world championships. The Oak Tree Racing Association, a separate non-profit entity that leases the Santa Anita racetrack from Magna, is the organization with which Breeders’ Cup has contracted to host the championships. Any financial failings or potential bankruptcy by Magna Entertainment will not affect the Breeders’ Cup, according to Greg Avioli, president and CEO of Breeders’ Cup Ltd.
“Because of Oak Tree’s contractual structure, they are fully protected from any possible Magna bankruptcy in terms of their ability to operate the meet in their standard fashion,” Avioli said. “(Oak Tree Racing Association) is a separate legal entity. They have a lease on the facility, and that lease would be maintained.”
Avioli did say that the Breeders’ Cup developed contingency plans to move the championships to Hollywood Park, but not because of Magna’s financial situation. “We had contingencies in place in the event that there might be problems with the new track,” he said, in reference to the new Pro-Ride synthetic surface recently installed at Santa Anita. According to published reports, horsemen and jockeys generally seem satisfied that the new surface is safe and formful after one week of racing during the Oak Tree meeting.
The pending due dates on loans are not the only question marks concerning Magna Entertainment. A California judge ruled this week that a shopping mall development planned for a section of Santa Anita’s parking lot cannot go forward. In Maryland, where Magna owns Laurel and Pimlico racetracks, a referendum is coming up in November on slot machines.
“The stock only trades on option values,” one market analyst observed, “and the option value is declining because the potential options for the company are quickly disappearing.”
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Tags: bank crisis, Breeders' Cup, bridge loan, credit crisis, Frank Stronach, Greg Avioli, Hollywood Park, laurel, Magna, Magna Entertainment, meca, mi developments, oak tree, oak tree racing association, Paulick Report, pimlico, Ray Paulick, santa anita, santa anita park, Slot machines, stronach
Posted in Breeders' Cup, Magna Entertainment, Synthetic surfaces | 7 Comments »
Tuesday, September 23rd, 2008
By Ray Paulick
While Congress begins deliberations on the proposed economic bailout package that could cost taxpayers as much as $1 trillion, Thoroughbred owners and breeders are beginning to feel the effects of the turbulence on Wall Street and other world markets.
The financial markets meltdown came smack dab in the middle of the industry’s most important transactional event: the Keeneland September yearling sale. The sale began with a lowered price ceiling during opening select sessions that saw some resilience in the middle market, but, as many consignors feared, the bottom fell out after the first week. Most yearlings going through the ring in the latter part of the Keeneland sale will reflect economic losses to their owners once stud fees, mare investment and boarding costs are taken into consideration.
But those losses are minor compared to what’s happened on Wall Street, which traditionally has created much of the wealth that’s found its way into the yearling market. “If anyone is dependent on new money in the horse business, I don’t think this is going to be a very good time for them,” one business analyst told the Paulick Report.
In addition, many yearling-to-juvenile sale pinhookers from Florida depend on bank loans to fund at least a portion of their investment, and those loans or lines of credit from banks are evaporating in the current crisis that actually began last August with the sub-prime mortgage fiasco.
Loans of all kinds will be more difficult to acquire, one banker told the Paulick Report, whether it’s for pin-hooking, stallion and mare acquisitions, or real estate. “A wide range of people need bank financing to buy farms or mares,” he said. “Some people who didn’t start off thinking they wanted to borrow end up taking out loans just like any other business often does. Stallion deals are often supported by banks. No matter what you are borrowing money for, it’s harder now and it will cost more. Everything is going to be more difficult.” In addition, the banker said, many businesses with “standing operating lines of credit” are going to feel the crunch. “There are acquisitional and seasonal businesses. Some spend money all year and collect over just a couple of weeks. Stallion or mare purchases term out over a number of years.”
The crisis could have a severe effect on the bloodstock markets at Fasig-Tipton and Keeneland in October and November, especially for mares in the $50,000 and under price range. It is expected the top end of the market, which is unlikely to establish any new records for high prices, will maintain some semblence of strength. The deadline to enter mares and weanlings in Keeneland’s massive November breeding stock sale preceded the financial market meltdown. What will be interesting to follow is the number of horses entered for Keeneland’s January sale of horses of all ages. Will breeders look ahead at cutting their losses on marginal mares and newly turned yearlings? The credit tightening comes as uninsured money market funds have disappeared into treasury bills and other secured investments. Banks that were counting on money market dollars to buy up bonds, mortgages and other loans now require cash on hand to extend credit to their customers. That cash, in many institutions, simply doesn’t exist in abundance.
“Things that have some value in the real world, like real estate loans, have no value in the market,” one analyst said. “Assets that used to be like cash no longer are like cash.” Many in the horse business are watching how the crisis is affecting the financially troubled Magna Entertainment ( MECA) and its real estate affiliate, MI Developments ( MID). Magna Entertainment is the racetrack operating company that is living month to month on bridge loans from MID and other creditors. Magna, controlled by Frank Stronach, owns Santa Anita Park (host of the 2008 and 2009 Breeders’ Cup) and Golden Gate Fields in California, Gulfstream Park in Florida, Pimlico and Laurel Park in Maryland, Lone Star Park in Texas, and Remington Park in Oklahoma, and several smaller tracks. Its stock, battered in recent years and recently the subject of a 1-for-20 reverse split to retain its listing on the exchange, has declined by 25% in the last five trading days, closing Monday at $4.39 per share.
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Tags: Breeders' Cup, breeding stock sales, credit tightening, fasig-tipton, Frank Stronach, horse business, Keeneland, keeneland january horses of all ages sale, keeneland november breeding stock sale, keeneland september yearling sale, magna developments, Magna Entertainment, market meltdown, meca, mid, Paulick Report, pinhookers, Ray Paulick, real estate market, stallion acquisitions, Thoroughbred breeding, wall street crisis, yearling sales
Posted in Breeding, Keeneland, Magna Entertainment, Pinhooking, Thoroughbred Auctions | 9 Comments »
Monday, September 22nd, 2008
By Ray Paulick
Best unintentionally funny line of the week came from John Brunetti, the owner of Hialeah Park. Discussing a conversation he had with Halsey Minor about the technology wizard’s interest in buying and reviving the shuttered South Florida racetrack, Brunetti was quoted in a trade publication as saying: “I have told him that in some ways I don’t think he understands this business.”
Does Brunetti think he understands this business? How could he? If he did, how did he let Doug Donn outsmart him on every move and get control of the best winter racing dates for Gulfstream Park? Why did state legislators and regulators turn their back on him? How did Calder crush Hialeah in head-to-head competition? Why did Brunetti raise take out to the point that he chased away any remaining horseplayers Hialeah had? Why has the track sat empty for more than seven years?
It’s a mortal lock that Hialeah will never reopen successfully with Brunetti as the owner and operator. I happen to think John Brunetti is a nice guy who loves racing, but I have zero confidence that he can revive Hialeah Park on his own (and I may be more optimistic than state officials or Florida horsemen).
Does Halsey Minor know everything there is to know about Thoroughbred racing? Of course not. But he comes to the game with passion, enthusiasm, capital and confidence that he can return Hialeah to some semblance of its past glory.
Brunetti isn’t the only industry veteran who thinks Minor may be nothing but a dreamer if he thinks he can revive horse racing as a sport. I’ve heard from a number of racetrack executives and horse owners who said they’ve heard it all before. But what is the alternative for Hialeah Park or operating tracks that are hanging on by a thread? Lobby to get slot machines, turn the facility over to a casino company and hope it will subsidize the money-losing portion of the business indefinitely?
Should Brunetti and others in the industry just blow off this opportunity that Minor presents to give horse racing in the Miami area one last chance to stand on its own as a sport?
I remember when Frank Stronach came into racetrack ownership and said he would try to make the sport more compelling and entertaining. In the beginning, Stronach said he had no interest in getting slot machines at his tracks. But Stronach became a victim of his ego, forcing in too many of his own bad ideas and forcing out too many executives who dared to disagree with him. He almost seemed obsessed with getting control of as many tracks as possible without having any idea what he was going to do with them all.
Gulfstream Park was the first Florida racetrack to get slot machines. Under Stronach’s vision, Gulfstream became the least successful slot machine operation in North America, based on the benchmark of dollars won per machine per day. Calder will be adding slots as early as 2009 after getting approval in a local referendum in January of this year. The rebuilt Gulfstream Park is more slots parlor and simulcast theater than it is a facility to host live racing. In short, it’s a disaster.
Calder, built to host hot-weather summer racing, has always struck me as a cold and impersonal track, but it’s never seemed colder or more impersonal than it is today. In a recent weekday visit there I stumbled across what seemed like no more than several hundred fans scattered throughout the first two floors (most of the third floor is closed).
 Count on Churchill Downs management to pigeonhole those fans in as small an area as possible once the slot machines are installed and plugged in. Racing at Calder will become secondary, though its purses will be healthier than they are today because of the slot subsidies. But what will Churchill Downs management’s long-term vision be for racing at Calder?
Minor said he has no interest in bringing slot machines to Hialeah Park. The competition for slots players is intense, with the Seminole Native American tribe holding the market share advantage at their Hard Rock Casino in Hollywood, Fla. Minor wants to focus on the excitement of racing and the fact that it’s the only sport you can legally bet on.
Racing needs people like Halsey Minor, and people in the industry should be doing everything possible to help him succeed.
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Tags: calder, CDI, churchill downs, doug donn, Frank Stronach, gulfstream park, Halsey Minor, hard rock, Hialeah Park, Horse Racing, john brunetti, Magna, Magna Entertainment, Paulick Report, racino, Ray Paulick, seminoles, Slot machines, thoroughbred racing
Posted in Churchill Downs Inc., Florida, Halsey Minor, Hialeah Park, Horse Racing, Magna Entertainment, Slot machines | 10 Comments »
Monday, September 15th, 2008
Ray Paulick
What in the world is going on inside the Churchill Downs Inc. executive offices? It’s slashed purses at Calder Race Course in South Florida by 17% and whacked almost $1 million from the fall stakes program at its home track in Louisville, Ky. Key management changes have been made at Calder and Fair Grounds in New Orleans, La., and press releases seem to be blaming horsemen for most of the problems.
Investors haven’t been wild about Churchill Downs stock ( CHDN), which closed at $46.45 Friday and hasn’t seen $50 a share since May 1. It’s 52-week high, $57.55, was achieved last December.
CEO Bob Evans and the TrackNet Media Group that was formed with Magna Entertainment to broker simulcast deals has refused to talk seriously with the Thoroughbred Horsemen’s Group, which is negotiating account wagering contracts with racetracks on behalf of local horsemen’s groups such as the Kentucky or Florida Horsemen’s Benevolent and Protective Associations. In fact, Churchill has filed anti-trust lawsuits against the organizations. Evans may be hoping that the longer he puts off dealing with the THG, the less resolve the horsemen will have to stick together in attempting to forge a better contract on account wagering.
That strategy doesn’t appear to be working. To the contrary, it looks more like Churchill Downs’ partner in TrackNet Media is bailing. Frank Stronach, the chairman and acting CEO of Magna Entertainment, sent out a press release a couple of weeks ago saying that Magna recognizes the THG as a beneficial national organization and is negotiating with THG.
For too long, horsemen have been losing ground and losing revenue as the percentage of dollars wagered that goes to purses has declined. The growth of simulcasting to non-pari-mutuel entities such as off-shore rebaters and account wagering companies has been at the expense of horsemen. It’s important horsemen understand why the status quo isn’t good enough and why they need to change the simulcast model, something the THG is trying to do.
SPEAKING OF WAGERING, hats off to Bloodhorse editor Dan Liebman for calling out the Jockey Club after it capitulated to Evans and to Churchill Downs’ biggest shareholder, Dick Duchossois, and decided to no longer provide the trade magazine with meet ending pari-mutuel handle figures. Churchill tracks under Evans and Duchossois have said that handle is no longer a meaningful statistic. Oh, really?
The decision by the Jockey Club to no longer provide this key economic indicator was disgraceful, but I wouldn’t hold out any hope the poobahs there will change their mind.
NO ONE PREDICTED KEENELAND’S SEPTEMBER YEARLING SALE WOULD BE UP, so it’s not that surprising to see a 13% drop in the gross receipts through the first six sessions of the 15-day marathon. That 13% equates to a $41-million decline in revenue that will not go into the pockets of breeders this year, and that red number only figures to increase as the sale reaches the second half. The drop in revenue will ripple throughout all kinds of Thoroughbred-related businesses.
The good news from the first four days (Books 1 and 2) was that the median held up fairly well, declining only 10% from $200,000 to $180,000. The home run horses, those selling for a million dollars and up, didn’t materialize as often as they have in recent years, but the middle market was relatively steady. “Most of us survive off the middle,” one breeder told the Paulick Report. “Getting one of the big horses is like hitting the lottery, but it’s not something you really plan on.”
Smart gamblers don’t play the lottery, and intelligent breeders know there are far more people playing in the middle market than at the top. As long as the middle is healthy, so are the breeders. There is just a lot less icing on the cake this year.
Others who are selling throughout the September sale breathed a sigh of relief if their best horses sold well during the first two books out of fear that the bottom of the market may collapse once the sale reaches books five and beyond.
WHO HAS BOUGHT THE MOST HORSES SO FAR IN THE MONTH OF SEPTEMBER? It wasn’t John Ferguson, or Shadwell Estate or the newly formed Legends Racing. Hint: It wasn’t at the Keeneland September yearling sale.
September’s busiest buyer so far (though not biggest spender) is a fellow named Mike Gill, the 2005 Eclipse Award-winning owner who has been on a claiming binge this month at Philadelphia Park. By our count Gill has claimed at least 30 horses in September at Philadelphia Park alone after similar buying sprees in Maryland and Massachusetts earlier in the year.
You remember Gill, don’t you? He’s the fellow who built a huge claiming operation earlier this decade, bought a training center, won a bunch of claiming races and then publicly complained when he led the nation in wins and earnings in 2003 and 2004 but didn’t get voted an Eclipse Award as outstanding owner.
The whining did him some good. When balloting was conducted for the 2005 racing season, Gill was once again the owner with the most wins and purse money won. This time, in what may be the worst decision in the history of the Eclipse Awards, voters representing the National Turf Writers Association, National Thoroughbred Racing Association and Daily Racing Form gave Gill the award as “outstanding owner.”
Why do I say that it was the worst Eclipse Award decision in history? I’ve got nothing against claiming operations and recognize it is the bread and butter portion of nearly every racing program in the country. However, in my mind, the Eclipse Awards are about excellence, whether it’s horses or people. Sheer numbers, especially at the claiming level, should not be misconstrued as excellence. In the category of outstanding owner, breeder, trainer and jockey, the leading candidates should be judged by how they performed at the top level of the sport, not the bottom level.
Gill, who was recently in the news because of some regulatory problems at his mortgage company, said he was getting out of the horse industry in 2006 when he accepted his Eclipse Award as outstanding owner. Many people had two words for him: good riddance.
“I’m going to miss racing, and I think racing is going to miss me, too,” Gill told Bloodhorse magazine.
Actually, Mike, we didn’t.
THE PHILADELPHIA INQUIRER WON’T BE COVERING GILL’S EXPLOITS since it accepted the early retirement of Turf writer Craig Donnelly only a month after the paper, the nation’s eighth largest, dramatically reduced the space allotted racing in its sports section. At that time, Inquirer editors told the Paulick Report it was keeping Donnelly but obviously they had a change of heart.
Newspapers may be an endangered species in the near future. Turf writers at daily newspapers already are.
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Tags: bob evans, calder, CDI, chdn, churchill downs, claiming, craig donnelly, daily racing form, dick duchossois, eclipse award, Frank Stronach, john ferguson, Keeneland, keeneland september yearling sale, Magna, Magna Entertainment, mike gill, National Thoroughbred Racing Association, national turf writers association, NTRA, ntwa, Paulick Report, philadelphia inquirer, Philadelphia park, Ray Paulick, shadwell, thg, Thoroughbred Auctions, Thoroughbred Horsemen's Group, tracknet media
Posted in Account Wagering, Churchill Downs Inc., Industry Organizations, Jockey Club, Keeneland, Magna Entertainment, Racing Media, Simulcasting, Wagering | 9 Comments »
Monday, August 25th, 2008
By Ray Paulick
While CNET founder Halsey Minor continues his efforts to purchase Hialeah Park from current owner John Brunetti, he also has contacted financially troubled Magna Entertainment about the possible sale of Santa Anita Park near Los Angeles and the company’s two Maryland Jockey Club tracks, Pimlico and Laurel. But after speaking with Magna’s chief financial officer, Blake Tohana, Minor doesn’t think Magna is a serious seller, despite recent comments by company chairman Frank Stronach during a conference call to discuss second quarter financial results.
“I had the most baffling conversation in my life with a CFO, particularly one whose job depends on asset sales,” Minor said in an email to the Paulick Report, which he also copied to Tohana. “Basically, nothing is for sale. Maybe they have some time shares for you. (Tohana) said Frank misspoke when he said he was considering selling a majority interest in Santa Anita. Now it is back to a minority interest.
“You can only buy (the Maryland tracks) if you have a gaming license. (Tohana) did not specify what that meant or why it was important. … This is despite the fact that Magna is not guaranteed any slot franchises in the current legislation, and they would need to post a $50-million bond which they don’t have to get one. At the very least if he had been on his toes he should have asked to borrow the money.
“You need to call him and hear this for yourself,” Minor suggested. “You would think you were talking to the CFO of Microsoft sitting on a pile of cash, given the attitude. Self-effacing, Blake is not. Not a good quality in a salesman. Without an investment bank, nothing sells if my experience is any guide.”
Minor said Tohana had no idea who he was when he called (“which is odd because I am the only person in America acquiring tracks right now and they claim they are selling them”) and eventually hung up on him. “I will go on record as saying these assets are going to be sold by banks,” Minor continued. “Banks don’t necessarily have good bedside manners, either, but they have good prices.”
Tohana responded to Minor with a terse email of his own, which he also copied to the Paulick Report, saying that Minor had “misrepresented” their telephone conversation. “Further, your manner of communicating to me via email and telephone was inconsiderate, rude and misinformed,” Tohana wrote. “In doing my job, I have always carried myself with dignity and professionalism. I think that view would be shared by anyone who has dealt with me during my career.”
Tohana went on to say that MEC has sold more than $400 million in assets “without investment bankers,” adding, “We will continue to pursue other asset sales and joint venture transactions as we have previously publicly disclosed. However, I do not have to take your personal insults just because you purport to have an interest in Santa Anita Park and the Maryland Jockey Club.”
Tohana also seemed irritated that Minor had called him to discuss the possible sale of the tracks during a family vacation, a comment that seemed to heighten Minor’s disdain for Magna’s CFO.
“I find interesting that you are on vacation at all and that you feel so offended I have bothered you on your vacation,” Minor wrote Tohana in a follow-up email. “My company is not imploding and yet I am fully engaged working to clean up some of your mess while here in Hawaii (on a vacation) with my family.
“Blake, you are condescending and that is no way to be with a company whose market value is less than many of our farms, whose massive debt is unserviceable and where you work in the service of the company that has literally blighted our industry.
“Enjoy your vacation, Blake, because when you get back things will only have gotten worse, not better, and you pissed off a potentially valuable ally royally. And if you haven’t noticed, you didn’t have many to start with.
“I believe results in life speak volumes, and I believe this applies equally to my career as it does to your company. Neither failure or success is an accident. A quick check would reveal that I have created billions in value, even exceeding your leader’s car parts business, while your outfit has not only destroyed massive amounts of shareholder value, but possibly the Thoroughbred business with it.”
When reached by the Paulick Report, Tohana said Minor was not “respectful” during their conversation. Tohana said he was fully aware of who Minor was when he received a call from him. “I had heard of the guy,” Tohana said, “but I wasn’t happy with some of the things he has said about our chairman (Stronach).”
Tohana has been Magna Entertainment’s CFO for more than five years, outlasting many of the executives who have come and gone in a revolving door atmosphere. He joined the company in July 2003 after serving in a number of executive positions at Fireworks Entertainment, a Toronto, Canada-based concern that produces and distributes television programs and movies.
“I’m quite a reasonable person,” Tohana told the Paulick Report. “I’m pretty straight up. Look, it’s not a secret (that we’ve had a great deal of executive turnover). This company hasn’t performed very well.”
Tohana insists Magna is “continuing to sell” some properties but said Stronach’s comments about possibly selling a majority interest in Santa Anita were “misreported.” He also said there remains the possibility that MI Developments, the real estate operating company that holds a controlling interest in Magna Entertainment, could be reorganized to relieve the debt-ridden racetrack company’s financial pressures. MI Developments recently extended by one month a bridge loan in excess of $100-million owed by Magna Entertainment and due at the end of August. Dennis Mills, a former member of Canada’s parliament and one-time vice chairman of Magna Entertainment, was recently named interim CEO of MI Developments following the departure of John Simonetti.
In the meantime, Minor continues to work on a business and operating plan for Hialeah. He has had a second meeting with Brunetti in Del Mar, Calif., and said Brunetti is working with his team on developing a business plan. “That’s a tremendous benefit,” Minor said, “and it shows that John really wants to help get Hialeah reopened.” Minor said the architects he would use to renovate Hialeah Park have inspected the long-shuttered track to get a better estimate of what the price tag would be to return it to its former condition.
Copyright © 2008, The Paulick Report
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Tags: blake tohana, cnet, Del Mar, dennis mills, fireworks entertainment, Frank Stronach, Halsey Minor, Hialeah Park, john brunetti, john simonetti, laurel, Magna Entertainment, Maryland Jockey Club, mec, mi developments, Paulick Report, pimlico, Ray Paulick, santa anita
Posted in California, Halsey Minor, Hialeah Park, Magna Entertainment, Maryland Jockey Club | 31 Comments »
Sunday, August 10th, 2008
Big Brown’s win wasn’t visually as impressive as his early-season triumphs leading up to the Triple Crown, but it was good enough for his connections to keep moving forward toward the Breeders’ Cup Classic, said to be his ultimate goal this year. Next up, however, will be as close to a “gimme” race as his owners and trainer can find. What’s being discussed is a specially created turf race at Belmont Park in mid-September.
So the New York Racing Association will now have two opportunities to promote the best older horse and best 3-year-old in America. Its new marketing wizard, Gavin “It’s Non-Negotiable” Landry, decided at the 11 th hour before Curlin’s Man o’ War attempt to admit fans for free to Belmont Park, but the move was made so late that word didn’t get out until the morning of the race. That promotion didn’t impress John Sabini, the new chairman of the New York State Racing and Wagering Board, who chided the association for its efforts and reminded them that NYRA is not a “private club” doing things for the benefit “of their own board.” NYRA has several weeks to promote the Woodward and over a month to promote whatever they’re going the Big Brown prep.
WHERE CURLIN GOES AFTER THE WOODWARD is still anyone’s guess. Majority owner Jess Jackson doesn’t seem interested in the Breeders’ Cup Classic, in part because he already won that race last year and seems bent on an international mission but, more importantly, because of the questions over the new synthetic surface being installed at Santa Anita Park, which will host this year’s Breeders’ Cup. That new surface, installed by the Australian company Pro-Ride, could help attract more international horses this year but almost might limit participation by American “dirt” runners, some of whose owners and trainers remain leery of synthetics. HALSEY MINOR’S LOVE AFFAIR WITH HIALEAH PARK took on a new dimension when the Internet entrepreneur visited the track and met with owner John Brunetti on Aug. 6. Minor said he is optimistic that Brunetti wants to see the track reopen and many people believe that will never occur under the current owner. Tempering the good news was Magna Entertainment’s latest financial confession that showed looming debt payments could force Frank Stronach’s company to sell all or part of some of its major tracks, including Santa Anita Park near Los Angeles. That’s a scary thought in a state that is already losing Bay Meadows in the north and is likely to see Hollywood Park closed within the next two to three years.
Maybe Halsey Minor will pay a visit to Santa Anita and save that track as well.
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Tags: Big Brown, Breeders' Cup, Curlin, Frank Stronach, gavin landry, Halsey Minor, haskell, Hialeah Park, jess jackson, john brunetti, Magna Entertainment, New York Racing Association, nyra, Paulick Report, Ray Paulick, santa anita park, steroids, Thoroughbred Owners and Breeders Association, woodward
Posted in Week in Review | 2 Comments »
Thursday, July 31st, 2008
By Ray Paulick
The installation of the new Pro-Ride synthetic surface that began at Santa Anita Park in mid-July is "ahead of schedule," according to Ron Charles, the track’s president and chief operating officer of Magna Entertainment. Santa Anita is hosting the 2008 and 2009 Breeders’ Cup world championships during the Oak Tree Racing Association meeting that opens Sept. 24. The two-day Breeders’ Cup is schedule Oct. 24-25.
"Right now it all looks good," Charles told the Paulick Report. "We did run into areas where the drainage system had problems; sand had gotten down in there, but those sections have been fixed. The entire drainage system was replaced before, but a lot of it has been replaced again because of the damage."
Pro-Ride was chosen by Santa Anita officials, Charles said, after they took a long look at synthetic surface and conventional dirt options. "I truly believe this was the right choice," Charles said. The previous synthetic surface, Cushion Track, developed serious drainage problems last winter that led to the cancellation of 11 racing days. Santa Anita has filed suit against the manufacturers of Cushion Track, which is also in place at Hollywood Park. The California Horse Racing Board mandates that all major Thoroughbred tracks in the state have synthetic surfaces.
Ian Pearse of Pro-Ride was brought in to help repair Santa Anita’s Cushion Track problems, developing a hybrid of Cushion Track and Pro-Ride that allowed Santa Anita to complete its meeting without further cancellations. Following the completion of the meeting, Santa Anita reviewed its options and in June announced it was going with Pro-Ride, a company based in Australia.
A small percentage of the Cushion Track surface will remain, Charles admitted. "Some of the original sand and fiber and rubber will still be in there, but it all will be mixed with the binder and new fiber," Charles said. "It will be 95% Pro-Ride. We’ve been screening the material and have removed some rocks, a lot of the rubber, and have reduced whatever odor there was."
Charles said the timetable calls for the installation to be completed a week before horses return to Santa Anita from Del Mar, which closes its meeting Sept. 3. The surface will be flooded twice to test its drainage efficiency - once before the Pro-Ride material is added to the drainage system and rock base and once after the material is added. "We’ll test it extensively," Charles said. "We want it to be 100% right before we let 1,500 horses on there for training."
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Tags: Breeders' Cup, cushion track, ian pearse, Magna Entertainment, pro-ride, ron charles, santa anita park, synthetic surface
Posted in Breeders' Cup, California, Magna Entertainment, Synthetic surfaces | 5 Comments »
Tuesday, July 29th, 2008
By Ray Paulick
TVG, the horse racing channel sold earlier this year when parent Gemstar-TV Guide was purchased by the digital technology company Macrovision (MVSN) , is now being shopped around to potential buyers by Swiss-based financial services company UBS, the Paulick Report has learned.
The auction of TVG gives the horse racing industry a tremendous opportunity to consolidate its convoluted and contentious cable television and account wagering system platforms that frustrate and anger horseplayers who are often required to hold multiple online or telephone wagering accounts to bet on their preferred tracks.
To seize this opportunity a group hug would be required among the major players, including Churchill Downs, Magna Entertainment and the Thoroughbred Horsemen’s Group that now negotiates account wagering contracts for most state horsemen’s organizations. With ongoing litigation by Churchill Downs against the Thoroughbred Horsemen’s Group and rumblings of a divide between Churchill and Magna on their TrackNet Media simulcast business joint venture, a deal seems unlikely at this time.
But what if logic prevailed?
The merging of two unprofitable racing channels into one could lend truth to that overused business cliché of one plus one equaling three. There is just one Golf Channel for that popular sport and one Speedtv channel to cover all motorsports. It is not logical for a struggling industry like horse racing to have two full-time cable channels, with separate management teams, productions staffs, and on-air talent.
Churchill and Magna are partners in HRTV, which was launched solely by Magna in 2003 and has been the No. 2 network behind TVG in distribution. Both TVG and HRTV are on the Dish Network and HRTV is on some cable companies, but TVG has broader cable distribution and is also on DirecTV. TVG, which launched in 1999, was owned by TV Guide before being purchased by Gemstar. Macrovision’s purchase of Gemstar-TV Guide was valued at $2.8 billion, with TVG’s value estimated at roughly $112 million, according to a report in Multichannel News, which quoted SNL Kagan analyst Derk Baine. The deal, announced last December, closed the first week of May 2008.
With credit markets tight, it seems unlikely any outside media companies would be interested in buying TVG, especially given the declining number of exclusive contracts TVG holds with racetracks and the shaky state of the racing industry. Even with the number of exclusive tracks in decline, TVG remains the market leader, both in distribution of its signal and dollars handled through its wagering platform. TVG handled $479 million in 2007 through a wagering hub in Oregon, compared with $177 million for Magna’s XpressBet and $215 million for Churchill Downs’ TwinSpires.com and affiliated companies Churchill purchased midway through the year.
Negotiations between account wagering companies have become far more contentious with the recent formation of the Thoroughbred Horsemen’s Group, which negotiates on behalf of nearly every major state horsemen’s organization. Churchill was unable to reach an agreement with the Thoroughbred Horsemen’s Group this spring and as a result could not offer online wagering on any races other than a handful of stakes, including the Kentucky Derby. That led to a significant decline in handle during Churchill’s spring-summer meeting. Account wagering on other tracks, including Churchill Downs-owned Calder in Florida and Magna-owned Lone Star Park in Texas, was shut down when the two sides failed to reach an agreement on how revenue should be distributed.
Doesn’t it make sense for the two major companies that own so many tracks (Magna and Churchill) and the Thoroughbred Horsemen’s Group to quickly come to terms on a broad-based revenue distribution formula for account wagering, then put their previous differences aside and think in terms of working together to grow this part of the pari-mutuel horse racing business.
The best way to achieve growth would be through a single cable network that carries all of the best simulcast signals and a powerful wagering platform that offers virtually every racetrack with live racing. The cable network and wagering platform could be owned by industry stakeholders, including racetracks and horsemen’s representatives, and be more widely promoted than the current patchwork of television channels and account wagering.
There would be concerns, of course, principally from owners of small racetracks who fear their simulcast signals would not get the exposure they currently get with two full-time racing networks. Other independent account-wagering companies might find it hard to compete, but anti-trust laws should prevent them from being monopolized.
It’s a long shot that industry organizations accustomed to fighting at the table over a dwindling pile of scraps can think in terms of growth and cooperation, so we can only hope that logic will someday prevail. The pending sale of TVG provides that opportunity.
Copyright © 2008, The Paulick Report
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Tags: Account Wagering, advance deposit wagering, churchill downs, gemstar-TV Guide, HRTV, macrovision, Magna Entertainment, Paulick Report, Ray Paulick, Thoroughbred Horsemen's Group, tracknet media, tvg, ubs
Posted in Account Wagering, Churchill Downs Inc., Magna Entertainment, Television | 13 Comments »
Sunday, July 27th, 2008
By Ray Paulick
Saratoga opens, and so do the skies.
That sums up the first several days of the upstate New York Spa’s business, which is not good news for a bankrupt organization that says it will need more bailout money from the state sometime in the next couple of months. Heavy rains washed away numerous turf races and showers even made an unscheduled appearance on Whitney day.
The NYRA has survived far worse weather patterns, including the near-perfect storm of a federal indictment, bankruptcy and a franchise renewal drama whose end-game could have led to a game of "musical boxes" on the front row of those cherished clubhouse seats at Saratoga. In the end, power and tradition won the day for the old guard, thanks to some new guard knee-capping by the dynamic NYRA chairman, Steve Duncker, a Wall Street fightin’ man originally from the anything but hardscrabble suburbs of St. Louis (west, not east St. Loo).
Fortunately for NYRA’s trustees and executives, there are some people around who make them look human, led by the husband-wife team of John Hendrickson and Marylou Whitney, who took backstretch philanthropy into their own hands (with assistance from a group of local businesses and horsemen) by providing weekly banquets and nightly movies for the stable hands.
BUT THE EARTH DOESN’T ACTUALLY CIRCLE around Saratoga in July and August (though some may think it does). There’s also Del Mar, whose first-week business declines had the guys in Hawaiian shirts and sandals looking very grim until a gigantic wave of Pick Six mania washed ashore on the July 26-27 weekend, contributing (along with a free concert and micro-brew festival) to the ninth-highest handle in track history. No one picked all six winners and $1.5 million carries over into Sunday’s Pick Six, promising to make that program a big one, too.
Purse cuts looked imminent, but maybe the surge can work where the Turf meets the Surf.
Incidentally, Del Mar won the head-to-head battle of the gate against Saratoga on Saturday, 32,291 at Del Mar to 29,655 at Saratoga. Saratoga won the handle bout, $25,017,333 at Saratoga to $20,531,679 at Del Mar. Del Mar’s numbers were way up from 2007, when just 24,873 attended on the same day. Saratoga’s were down 9.7% in handle and 5.9% in attendance from 2007 when 31,510 were on hand for the first "Win and You’re In" day and handle was $27,708,217.
HIALEAH PARK’S John Brunetti was among those in the large Del Mar crowd on Saturday (he lives in nearby Rancho Santa Fe). Brunetti told the Paulick Report that he is hoping to bring live racing back to Hialeah Park on his own accord and doesn’t need the help of Halsey Minor, the cash-rich, Internet-savvy Virginian who actually is willing to invest tens of millions of his own cyber dollars into not only reopening Hialeah Park but making it a showplace.
Poor old Mr. B (it could stand for "beleaguered") just doesn’t get it. Brunetti seems to be a very nice man, but he’s been consistently outfoxed by Doug Donn, Ken Dunn, Churchill Downs and even Frank Stronach in the South Florida racing wars, and his same old "woe is me" song to state legislators isn’t going to change things for the better. He hasn’t run a live race at Hialeah since 2001, and he ran many horseplayers years earlier when he jacked up the takeout to unprecedented rates following deregulation.
But there is an unmistakable opportunity to bring Hialeah Park back if Brunetti is willing to put his ego and bluster aside. He could ride off into the sunset a hero as the man who kept the Hialeah Park dream alive long enough for the new sheriff to come into town and clean up.
The Paulick Report will have more on Hialeah and Halsey Minor in the coming week.
DID I MENTION EGO AND BLUSTER? That leads me to Aurora, Ontario, Canada, home of Magna Entertainment, which lost another top manager last week with the resignation of Scott Borgemenke, the vice president of racing. This management change was another in a long line of executive exits in Frank Stronach’s empire detailed in the Paulick Report.
Stronach does some things right … breeding horses, for example. His champion filly, Ginger Punch, was one of the on-track stars at Saratoga during the Breeders’ Cup’s "Win and You’re In" telecast on ABC Saturday afternoon (which featured an entertaining back-and-back forth between Michael Iavarone and Rick Dutrow, the owner-trainer team that handles Big Brown). In winning the Go for Wand under tough circumstances (every jockey in the race tried to keep her boxed up), the daughter of Awesome Again displayed the kind of guts and determination every breeder would like to see in his or her horses. She was impressive.
So was Tracy and Carol Farmer’s 7-year-old Commentator, who ran away with the Whitney in powerful fashion. Hall of Fame trainer Nick Zito said the win was one of the high points of his own career and puts the New York-bred gelding by Distorted Humor in the same league as Kelso and Forego, two legendary geldings from the past.
Heady company indeed.
Copyright ©2008, The Paulick Report
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Tags: Breeders' Cup, commentator, Del Mar, Frank Stronach, ginger punch, Halsey Minor, Hialeah Park, john brunetti, john hendrickson, Magna Entertainment, marylou whitney, Michael Iavarone, New York Racing Association, nyra, Paulick Report, pick six carryover, Ray Paulick, rick dutrow, saratoga, steve duncker, tracy farmer, win and you're in
Posted in Week in Review | 2 Comments »
Wednesday, July 23rd, 2008
It’s almost impossible to keep track of the comings and goings of executives at Magna Entertainment, the racetrack spinoff created in 2000 from Frank Stronach’s highly successful auto parts company, Magna International.
Magna Entertainment owns numerous racetracks, including Santa Anita Park and Golden Gate Fields in California, Gulfstream Park in Florida, Pimlico and Laurel Park in Texas, and Lone Star Park in Texas; it co-owns HRTV with Churchill Downs and operates the Xpressbet account wagering company.
When the public company’s stock price fell below $1 per share earlier this year, the MEC board of directors enacted a 1-for-20 stock split, giving shareholders one share for each 20 they own. A $1,000 investment in MEC (symbol MECAD on NASDAQ) one year ago would be worth just $121 today. A $1,000 investment in MEC when it was created in 2000 would be worth less than $64 today. 
As a sidenote, during the time the stock price was plummeting, Stronach lent his name to a product called Frank’s Energy Drink, complete with "energy girls" and special events, a move that further fueled critics who said Stronach was no longer in touch with what was going on at his racetracks.
The latest departure, Scott Borgemenke, from the position of executive VP of racing, led the Paulick Report on a search of other departures from the executive offices of MEC’s headquarters in Aurora, Ontario, Can., and at various racetracks.
Here are just a few, including statements made by the executives and by Stronach upon their hiring and their leaving:
SCOTT BORGEMENKE
Jan. 28, 2008 - Appointed to the position of Executive Vice-President, Racing.
Said Borgemenke: "I am very excited to be taking on this new position. MEC’s commitment to the racing industry is unmatched. I feel fortunate to be joining a great team and look forward to putting my experience to work on the company’s behalf."
Frank Stronach, MEC’s Chairman and Interim Chief Executive Officer, stated: "I am very pleased to have Scott join our team. I first met Scott a number of years ago and am confident that he will make a positive contribution to MEC."
July 21, 2008 - Borgemenke to leave his position as Executive Vice President, Racing effective July 18.
Stronach stated: "Scott has helped MEC move forward on a number of important operational initiatives. We very much appreciate his efforts, and we wish him well."
Said Borgemenke: "MEC is a company with enormous growth opportunities. I wish my friends there nothing but success, and will continue to provide any counsel I can. I will watch intently as the MEC team implements its strategic plan. Unfortunately, at this point in my life, my corporate and family responsibilities conflict."
CHRIS DRAGONE
Nov. 28, 2007 - Named president of Magna Entertainment’s Maryland Jockey Club tracks.
Said Dragone: "I look forward to working toward improving the racing and entertainment experience for Maryland horsemen and our customers. Working with the other key stakeholders I hope to build upon the platform established by Lou Raffetto and the De Francis family."
Stronach stated: "MEC remains strongly committed to the future success of Thoroughbred racing in Maryland. To this end we will put the full support of MEC behind Chris and the MJC management team."
May 13, 2008 - Dragone to be released as MJC president after Preakness.
Frank Stronach told Washington Post: "Chris is a nice fellow, but we thought (Tom Chuckas) had more experience."
LOU RAFFETTO
Feb. 10, 2006 - Lou Raffetto named president of the Maryland Jockey Club, replacing Joe De Francis.
Nov. 28, 2007 - Raffetto replaced by Chris Dragone as president of Maryland Jockey Club.
Stronach stated: "Lou worked very hard during his tenure with MJC to manage the day-to-day operations and improve the future of Thoroughbred racing in the state of Maryland. We wish him well in his future endeavors."
Said Raffetto: "I wish my colleagues at MJC well going forward and hope that the company will be successful in implementing its long-term plans."
MICHAEL NEUMAN
Feb. 27, 2007 - Michael Neuman named CEO. (Neuman succeeds Stronach, who has been Interim CEO since March 2006.)
Stronach stated, "The Board of Directors conducted an extensive search for candidates who understood the role of horse racing operations, gaming and entertainment to MEC’s business, while also demonstrating a proven track record to execute in the important new areas of opportunity. The Board of Directors is pleased to have attracted a candidate for CEO so uniquely qualified as Michael to lead MEC at this exciting time. We were also impressed with Michael’s understanding of the continued importance of debt reduction and improved operational effectiveness to MEC."
June 22, 2007 - Neuman leaves the company "effective immediately to pursue other opportunities.
Stronach stated: "Michael worked very hard during his time at MEC and we wish him well in his future endeavors."
Said Neuman: "I wish my colleagues at MEC well going forward and hope that the company will be successful in implementing its long-term plans."
JOE DE FRANCIS
July 20, 2006 - Joe De Francis named a Magna Entertainment Director, member of Executive Management Committee and Stronach’s "principal advisor on all technology and distribution initiatives."
Stronach stated: "Over the years, Joe has made an enormous contribution to the horse racing industry and to Magna Entertainment, in particular, and we are delighted that he has taken on this new role. Given Joe’s vast knowledge of both Magna Entertainment and the racing industry, we feel he is the perfect fit for our Board. On behalf of the directors of Magna Entertainment, I welcome Joe to the Board."
Said De Francis: "It has been a pleasure working with everyone at Magna Entertainment and watching the company evolve. I am thrilled about the direction in which Magna Entertainment is headed and look forward to being a part of this exciting time."
March 3, 2008 - De Francis resigns as a Director.
Stronach stated: "I want to thank Joe for all of his hard work on behalf of MEC over the years and we wish him well in his future endeavors."
PAUL CELLUCCI
March 18, 2005 - Former Massachusetts governor and U.S. ambassador to Canada Paul Cellucci named Executive Vice-President of Corporate Development for Magna.
Said Cellucci: "It has been an honor to serve the people of the Commonwealth of Massachusetts and the President of the United States, but it is time for me to step away from public life. I am very excited about the prospects for MEC and working with Frank Stronach and MEC’s management team to build MEC into a global entertainment company and improve stockholder value.
Stronach stated: "Mr. Cellucci has an outstanding record of public service and will make an enormous contribution to (Magna Entertainment) and he will play a leadership role in our efforts to bring about regulatory reform at the state level aimed at modernizing the horse racing and pari- mutuel industry."
June 30, 2006 - Cellucci resigns.
Stronach stated: "Paul has helped MEC move forward on a number of important initiatives and we are pleased that we will continue to benefit from his counsel as he builds his new consulting practice", said Frank Stronach, MEC Chairman.
Said Cellucci: "MEC is a young company with a great future and I have enjoyed my full-time association with Frank and the other members of management. As I move into this new phase of my career, I look forward to continuing to advise MEC as it successfully implements its strategic plan".
TOM HODGSON
March 8, 2005 - Hodgson named President and CEO of Magna, replacing Jim McAlpine.
Said Hodgson: "Over the past several years, MEC acquired and developed the racing content and technology necessary to become a truly global player in the pari-mutuel industry," Hogdson said. "In order to ensure that MEC remains well-positioned to capitalize on industry opportunities, including alternative gaming and international opportunities, we need to operate with financial discipline."
Stronach stated: "MEC remains committed to its strong vision and leadership position within the horseracing industry. However, at this point in our development, we need to focus on financial and operating discipline at many of our operations. Our entire board, including Jim McAlpine, strongly supports Tom’s appointment as well as the need for improved financial discipline throughout the company. Tom brings a very strong financial background to MEC and he, together with the other members of the MEC executive management committee, will ensure that MEC maintains that focus."
March 14, 2006 - Hodgson resigns, effective March 31. Stronach named interim CEO while search for a new CEO is launched. Hodgson remains a consultant.
Stronach stated: " The Board has decided that, going forward, MEC should seek a CEO with in-depth knowledge and experience in the horseracing and gaming industry who can lead the Company in fully exploiting its opportunities in
this sector….Tom Hodgson has more than achieved our recapitalization plan goals, and we are grateful for his contributions to the Company."
JAMES MCALPINE
Jan. 10, 2001 -James McAlpine named president/CEO.
Stronach stated: "We are delighted to be able to confirm the appointment of Jim McAlpine as President and Chief Executive Officer of MEC. Having worked with Jim for many years while he was a senior executive officer of Magna International Inc., I have complete confidence in his talents and abilities. I believe that this appointment provides MEC with strong, experienced leadership for its new management team."
March 8, 2005 - McAlpine retires as CEO. He remains as a consultant to the company.
Stronach stated: "On behalf of the board of directors of MEC, I would like to thank Jim for his hard work over the past several years in launching MEC and helping to position it for the next stage in its development. We look forward to Jim continuing to contribute to MEC in his new role."
Said McAlpine: "Over the past five years, MEC people have worked diligently to make MEC the company that it is today, a company filled with opportunity. I have enjoyed leading this dynamic group and look forward to making a continuing contribution by supporting Frank, Tom and the executive management committee to see MEC achieve its full potential."
BRIAN TOBIN
March 24, 2004 - Former Canadian governmental official Brian Tobin elected Vice-Chairman of the MEC Board. Tobin is CEO of Magna Development, the majority shareholder of MEC.
Stated Stronach: "Brian will be an excellent director and I look forward to his contributions to our Board’s deliberations."
Aug. 20, 2004 - Tobin resigns.
Stronach stated: "Brian Tobin has been a great team leader and a great team player. The Board of Directors and I wish him well in his future business endeavours."
Said Tobin: "I have great respect for the MEC team and for Frank Stronach."
MARK FELDMAN and JERRY CAMPBELL
July 14, 2000 - Mark Feldman, named CEO (replacing Jerry Campbell, who was named vice chairman of the board).
Said Feldman: "I am thrilled to have the opportunity to work with Jerry Campbell, the other members of the MEC Board of Directors and the talented MEC management team. I am anxious to get started implementing the Company’s multi-faceted growth strategy, including maximizing opportunities to utilize interactive media in sports wagering, development of the Company’s real estate assets with location based entertainment and retail operations and improving cash flow by taking advantage of scale efficiencies in track operations. All of these initiatives will be supported and enhanced by our commitment to developing a strong global brand."
Said Campbell: "I am pleased to continue to serve as Vice-Chairman and to remain a director of the Company. MEC has a strong balance sheet, has assembled some of the finest and strategically located thoroughbred racetracks in the United States and has the ability to expand, particularly pari-mutuel wagering via off-track betting centers (OTB’s) and telephone account wagering systems, within currently existing regulations."
Stated Stronach: "I would like to thank Jerry for his contributions in establishing the Company and am delighted that he will continue to provide guidance and assistance to the management team as Vice-Chairman. I believe that the management changes…will facilitate our pursuit of the opportunities in media distribution of racing and sports wagering."
Dec. 11, 2000 - Feldman resigns.
Stronach stated: "As was previously announced, Don Amos has been appointed Chief Operating Officer and Graham Orr has been appointed Chief Financial Officer of the Company. Mr. Amos and Mr. Orr are based in Toronto, where they were both previously senior officers of Magna International. Their appointment reflects my desire to remain closely involved with the Company during its formative years. As a result, Mark agreed that it would be more effective to consolidate operations in Toronto, but was not prepared to relocate his family to Toronto. I am pleased that Mark has agreed to continue to provide his services to the Company as a consultant, as he is an outstanding media executive."
Said Feldman: "I continue to be enthusiastic about the growth potential for the Company and its prospects to become a leader in the horse racing account wagering business. It is clear that Mr. Stronach should work closely with the executive team during these early years of developing the Company’s operations. In this regard it makes sense to operate the business from Toronto. I look forward to continuing to assist MEC in its key initiatives in the electronic media fields."
A partial list of other executives who have left the company in the decade since Frank Stronach made his first racetrack purchase (Santa Anita Park) in December 1999:
Bill Baker, Peter Beresford, Rick Cowan, Doug Donn, Roman Doroniuk, Andrew Gaughn, Michael Gilligan, Clifford Goodrich, Ed Hannah, Corey Johnsen, Brant Latta, Jack Liebau, Chris McCarron, Jack McDaniel, Graham Orr, John Perrotta, Lonny Powell, David Romanik, Scott Savin.
By Ray Paulick
Copyright ©2008, The Paulick Report
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Tags: andrew gaughn, bill baker, Brant Latta, brian tobin, chris dragone, chris mccarron, clifford goodrich, corey johnsen, david romanik, don amos, doug donn, ed hannah, Frank Stronach, graham orr, jack liebau, jack mcdaniel, James McAlpine, jerry campbell, joe de francis, john perrotta, lonny powell, lou raffetto, Magna, Magna Entertainment, mark feldman, mec, michael gilligan, michael neuman, paul cellucci, Paulick Report, peter beresford, Ray Paulick, rick cowan, roman doroniuk, scott borgemenke, scott savin, tom hodgson
Posted in Magna Entertainment | 9 Comments »
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