Penn National considering selling jockey club stake
Posted: 6:48 pm Thu, February 24, 2011
Daily Record Business Writer
D. Eric Schippers, a spokesman for Penn National, said in an e-mail Thursday that the company is exploring the option of selling and believes the jockey club’s interests “may be better served by a single entity ownership structure given the complexities and dynamics of any 50/50 partnership.”
The gaming company bought 49 percent of the Maryland Jockey Club in May with the intent of getting slots approved at Laurel Park. Ontario-based MI Developments Inc. owns 51 percent of the club.
Penn National officials met on Wednesday with lawmakers and Gov. Martin O’Malley’s staff to discuss its plan to sell its stake in the jockey club. The company has been a source of consternation for state officials, who have on one hand watched as what would be the state’s top revenue-producing casino be delayed by a year while on the other, Penn National, through the jockey club, has asked for state handouts to keep its race tracks afloat.
“If they haven’t burned [bridges], they’ve certainly warmed them up,” said Sen. James E. DeGrange Sr., D-Anne Arundel.
The majority owner, MI Developments, struck a deal Feb. 1 that would transfer all of its racing assets, including Laurel and Pimlico, to Chairman and CEO Frank Stronach. Stronach will give up control of MI Developments, according to the agreement, which is expected to close June 30.
Officials from MI Developments could not be reached for comment.
“At this point, I think it would be absolutely great if Penn Gaming were no longer a partner in the jockey club for the racing industry’s sake,” said Tom Bowman, president of the Maryland Horse Breeders Association. “Stronach has my admiration because he has a vision for the future that includes racing.”
J. Michael Hopkins, executive director of the Maryland Racing Commission, said having one entity to work with for racing issues would “make the oversight of the industry more manageable.”
Magna Entertainment Corp. transferred the jockey club to MI Developments, its parent company, last year after operating in bankruptcy for more than a year. MI Developments then struck a deal with Wyomissing, Pa.-based Penn National to acquire the interest in the club. Penn National also owns the state’s first casino, Hollywood Casino Perryville, and recently purchased Rosecroft Raceway in Prince George’s County.
Penn National has said it wants slot machines at Rosecroft, where slots have not been authorized, and at Laurel Park in Anne Arundel County. The Cordish Cos. won the lone slots license designated for that county and broke ground for what will be the state’s largest slots facility next to Arundel Mills mall. Adding new slots locations would require the passage of a referendum changing the state’s constitution.
Penn National funded the jockey club’s $7.4 million campaign to block construction of the Arundel Mills facility. Cordish Cos. President David S. Cordish and the club staged a bitter battle to win the vote, and the groundbreaking of the casino was delayed by about one year.
Since then, legislation has been introduced in the General Assembly to keep casino operators from interfering with the opening of other gambling operations. The bills, SB 373 and HB 868, were filed in response to the attempts by Penn National. Cordish Cos. has also filed a defamation lawsuit against Penn National, seeking $600 million in damages from the company and its co-defendants.
DeGrange and other lawmakers said the ownership change could be a positive step for the jockey club, and the thoroughbred racing industry.
“That relationship clearly wasn’t working for us,” said House Economic Matters Committee Chairman Dereck E. Davis, a Prince George’s Democrat who has been outspoken in his opposition to the company’s plans to put slots in his county.
“Hopefully they’re going to demonstrate with these actions that they’re willing to be good corporate partners,” he said.
Schippers said the company’s actions with the Maryland Jockey Club will not affect its intended acquisition of Rosecroft. Penn National is also considering dropping its State Board of Contract Appeals lawsuit against the Cordish Cos., he said.
“We discussed potentially dropping the suit as a good will gesture and a sign of good faith that our only interest has been, and will continue to be, finding a long-term solution to help save Maryland racing,” Schippers said in an e-mailed response to questions.
Last year, the jockey club proposed reducing the number of live racings days at Pimlico and ending live racing at Laurel, but the Maryland Racing Commission quashed two proposals from the club.
The two co-owners had also publicly given conflicting statements on what would be the fate of the Maryland Jockey Club properties. The jockey club had announced plans to scale down the racing season at the properties, but days later Stronach said he would keep 2011’s racing schedule at 146 days.
“It was very difficult at first, because they looked like they were on two different pages,” said Louis J. Ulman, chairman of the Maryland Racing Commission. “We’ll see what they do. Nothing would surprise me.”
O’Malley then negotiated a last-minute deal that allowed year-round racing to continue in 2011, with the state giving an additional $3.6 million from slot money to the tracks.
Daily Record business writer Nicholas Sohr contributed to this article.