Ushering in what chairman Louis Ulman called "the dawn of a new era in Maryland racing," the Maryland Racing Commission yesterday unanimously approved the sale of a majority interest in the state's thoroughbred racetracks to Magna Entertainment, a Canadian-based racing conglomerate that owns some of the top tracks in the country.
At a hearing at Laurel Park, the commission needed little more than an hour to approve by a 9-0 vote the purchase by Magna of 51 percent interest in Maryland Jockey Club from the family and partners of president Joe De Francis, which has held ownership of Laurel since 1984 and Pimlico since 1986.
Magna cleared the final hurdle to the purchase late Tuesday night by making a guaranteed financial commitment toward upgrading the stable and housing areas at the tracks and the Bowie Training Center, at the commission's insistence.
As a condition for issuing an operating license, Magna agreed to an irrevocable subscription agreement that ensures it will spend a minimum of $15 million by June 30, 2004, on upgrades (in addition to the purchase price of approximately $60 million).
"To us, it wasn't very important because we would have wound up doing it anyway," said Magna Entertainment president and chief executive Jim McAlpine. "But for the racing commission it was very important."
Before voting, each commissioner took time to thank McAlpine for his cooperation during the commission review process. Magna, which owns and operates 10 racetracks and recently purchased Lone Star Park in Texas, submitted to a financial audit by the commission as well as a criminal background check.
"You can't believe how accommodating they've been," said commission member Terry Saxon.
Magna, which will incorporate a subsidiary called Maryland Racing Inc. to operate the tracks, now must receive approval next Wednesday from the Virginia Racing Commission before consummating the deal. After that, McAlpine said, the company, which owns Gulfstream Park in Florida and Santa Anita in California, will pursue its vision of making the Maryland tracks its prized properties.
"Maryland has a tremendous tradition in racing and breeding," McAlpine said. "We also were attracted because of the Preakness. It is the middle jewel of the Triple Crown. For Magna, it will become the crown jewel."
De Francis and his sister, Karen, will retain 42 percent equity in the tracks with the option to buy up to 49 percent. An option clause in the purchase contract allows the De Francises to sell their share to Magna at any time for $18.3 million. Magna holds the option to buy out the remaining shares four years after the contract is signed.
"I could not be more excited and enthused," said Joe De Francis, who will continue to oversee day-to-day operations at the track. "When we announced the transaction back in July, we said the days of small, independent racetracks is over."
When Magna first announced the deal to buy Laurel Park and Pimlico in July, chairman Frank Stronach and McAlpine detailed plans to turn the tracks into lavish entertainment destination sites that would include partnerships with major retail, theater and dining establishments. The company envisions constructing a worldwide racing empire that not only will lure new fans to the sport, but allow existing ones to bet on the sport from home via its recently launched Horse Racing Television network.
After the meeting, McAlpine said he hoped the state legislature would consider giving the track slot machines to allow it to better compete with tracks at neighboring Delaware and West Virginia.
"We didn't get into the racetrack business to get into slots," McAlpine said. "But as other states have gone that way . . . it affects the competitiveness of Maryland racing."
Racing Note: Thunderello opened as the 9-5 morning line favorite in Saturday's Grade I Frank J. De Francis Dash following yesterday's draw. He is coming off a strong showing in the Breeders' Cup sprint, is trained by Scott Lake, and will be ridden by Edgar Prado when he breaks from post seven. California-based Avanzado, who has won his past three starts, is the 5-2 second choice from the sixth post.