Posted: 1:15 pm Fri, May 7, 2010
By Liz Farmer
Daily Record Business Writer
Penn National Gaming’s new stake in the Maryland racing scene could be a saving grace for the sport that’s been on the decline in this state for the last decade — but the deal’s impact will depend on whether the company can bring slots to Laurel Park.
“They’re a very financially stable company and they have a history in racing,” said Maryland Jockey Club President Tom Chuckas. “I think the future for racing looks better than it has in a long, long time.”
After more than a year of operating in bankruptcy, Magna Entertainment Corp. transferred the jockey club (which operates Laurel and Pimlico Race Course) to Ontario-based MI Developments Inc., its parent company. On Friday, MID announced a deal in which Penn National, known in the industry as one of the pioneers of race track casinos, would acquire an interest in the jockey club.
Dennis Mills, CEO of MID, would not be specific about MID’s ownership percentage with Penn National or any revenue sharing agreements.
“It’s a partnership — it’s like a marriage,” he said.
Peter M. Carlino, CEO of Penn National, did not return requests for comment.
Mills did say that MID was courted by several companies that wanted to operate racing at Laurel and Pimlico for MID. He declined to say what other companies were in the running with Penn National.
If the deal is approved by the Maryland Racing Commission, Penn National could represent a formidable force for Maryland’s horse racing tracks. Penn National Race Course, in Grantville, Pa., opened in 1972, and the company began acquiring race tracks in 1996 with Pocono Downs in Pennsylvania. Today it operates 19 facilities in 15 states, with a focus on slot machines.
“I think if I were a horseman in Maryland and read this news I’d feel less worse,” said Tim Rice, a horse racing analyst with Rice Voelker LLC in Louisiana. “[Penn National] is a phenomenal company. … They basically have one billion in cash on their balance sheet. They’re shopping, and they’re in a position to do a lot.”
This year the track operator plans to add table games to its facilities in West Virginia and Pennsylvania. In another joint venture, this one with International Speedway Corp., it is developing a full casino at Kansas Speedway in Kansas City, anticipated to open in early 2012. It is also developing two casinos in Ohio, with openings targeted for late 2012.
But a big question is whether Penn National will even get the opportunity to run slots at Laurel Park. The only license to operate slots in Anne Arundel County is held by Baltimore developer David Cordish. His plans to build a slots casino near the Arundel Mills mall could be quashed in a county-wide referendum this fall. But even if voters reject Cordish, that’s no guarantee Laurel would win in a rebid of the county gaming license.
In addition, if Laurel got a slots license, Penn National would need to address a state law that prohibits owning interests in more than one casino in Maryland. The company already holds the license to operate a slots parlor in Cecil County, which is slated to open this October.
Donald C. Fry, chairman of the state board that awards slots licenses, said if Penn National was receiving a percentage of gaming revenues in exchange for operating slots at Laurel, that would be perceived as owning an interest and not be permitted.
“But if they were getting a flat fee … then that might pass legal muster,” he said.
But if Laurel did get slots, Penn National’s presence could ensure a more stable transition. Rice said on its own, Magna didn’t exactly have the best results when it attempted to install and operate slots at Gulfstream Park Racing & Casino in Florida. Magna installed slots in November 2006, but the business stumbled and went through a series of management changes as it lost money during its first few years.
Rice said he thought MID would have faced the same struggles if it tried to operate slots on its own in Maryland.
“I think they had no shot,” he said.