Posts Tagged ‘mec’

MINOR CALLS MAGNA PROPOSAL ‘PREPOSTEROUS’

Wednesday, November 26th, 2008

By Ray Paulick

Halsey Minor thought he would be meeting with MI Developments (MID) chief executive officer Dennis Mills in Baltimore, Md., on Wednesday morning to discuss Minor’s proposed buyout of the company’s $100-million loan to Magna Entertainment (MECA), the financially beleaguered racetrack company that operates Santa Anita Park and Golden Gate Fields in California, Gulfstream Park in Florida, and Pimlico and Laurel Park in Maryland, among other facilities.

When Mills failed to show, Minor called him, only to discover that Mills was still at Magna’s corporate headquarters in Canada putting out a press release outlining new loans from MI Developments to Magna Entertainment, further extensions of existing loans, and a proposed reorganization that could put the racetrack company more firmly under the control of Frank Stronach. The proposed reorganization, subject to MI Developments shareholder approval, is “an egregious attempt to hijack shareholder value and will never pass,” Minor told the Paulick Report.

Minor, a technology entrepreneur who created CNET.com among other Internet companies, is a horse owner and breeder who has also expressed interest in buying and restoring the dormant Hialeah Park in South Florida.

“He stood me up to put out this press release?” Minor said of Mills. “It might have been good to have met with me before the press release, because we have a better offer, by far, that will be far more acceptable to MID shareholders. It was a good faith attempt on my part to sit down with him and see if there was something we could do. Instead they put out this preposterous press release and he stands me up the day before Thanksgiving after I traveled all the way here to meet with him.

“I could have told Mills that what he put out, even though the stock is up a few pennies, has no chance of passing. There is a contingency (among MID shareholders) that is of the mind that says, ‘We’ll do anything to get rid of Frank,’ but this proposal doesn’t really fully get rid of him."

At least two institutional shareholders in MID, Farallon Capital Management and Greenlight Capital, have suggested possible legal action for breach of fiduciary responsibilty by MID’s board of directors over the MECA loans, one of them calling MECA a "financial sinkhole." A previous proposal to hand MECA over to Frank Stronach was voted down by MID shareholders earlier this year.

The proposal calls for a new loan from MID to MECA of $50 million to fund current operations and $75 million to pay for a possible slots license and temporary facility in Maryland, along with extensions of an existing bridge loan and of repayment deadline for another $100-million loan.

A second stage of the proposal, subject to shareholder approval, calls for MID to purchase unsold real estate in Dixon, Calif., and near the Palm Meadows training facility in Florida at what it calls “fair market value.” It also seeks additional extensions on the loans and the option to repay the loans in MECA stock instead of cash. The third and final stage, taking control of MECA away from MID and into the hands of an entity called the “Stronach Group,” is contingent upon MECA retiring its convertible bonds.

Minor insists that even if the proposal somehow gets shareholder approval, MECA will fail. “Frank doesn’t buy the stock until after the $295 million in convertible bonds are paid off,” he said. “If they are not paid, the company goes bankrupt. The slots deal in Maryland is terrible, and most of the big guys have said they are not even going to try to get the license. It’s only 33% (of revenue), versus close to 50% in Pennsylvania and Delaware. He has to spend $250 million to build his slots parlor, then give 60% of his profits to (Joe) DeFrancis (who sold his family’s interests in the Maryland tracks to Magna with a contingency for a share of any future slots revenue). So his own deal, which sucks all this money away from MID shareholders, would itself have a life of a year or two before it went under. This is Stronach’s way of saying, ‘I have this company (MID) hostage. If you want me to go away, you have to pay up.’

“The shareholders fully intend to have their day with Frank.”

Magna Entertainment (MECA) closed at $2.01 on Wednesday, up $.60, a gain of 42.8% on the day. MI Developments (MIM) gained $1.62 to close at $10.05, up 19.2%.

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Tags: dennis mills, farallon capital management, Frank Stronach, greenlight capital, gulfstream park, Halsey Minor, Magna, Magna Entertainment, Maryland Jockey Club, maryland slots, mec, meca, mi developments, mid, mid shareholders, mim, Paulick Report, Ray Paulick, santa anita, stronach, stronach group
Posted in Halsey Minor, Magna Entertainment | 13 Comments »

MINOR TAKES ON MAGNA

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 | 30 Comments »

MAGNA EXECS: BEEN NICE, BUT PUT ME ON ICE

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

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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 »

Posts Tagged ‘mec’

MINOR CALLS MAGNA PROPOSAL ‘PREPOSTEROUS’

MINOR TAKES ON MAGNA

MAGNA EXECS: BEEN NICE, BUT PUT ME ON ICE

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