Churchill Downs Inc., working creatively to keep up with the deep-pocketed Frank Stronach, completed a $72-million stock deal Friday, giving the Kentucky Derby track control of Arlington International Race Course in suburban Chicago and making Dick Duchossois, the owner of Arlington, the largest shareholder in the Churchill company.
Having bought Hollywood Park and Calder Race Course near Miami last year, at a total cost of $226 million, Churchill Downs had all but used up its credit line. So it effected a merger, throwing more than three million shares of stock at Duchossois, the hard-nosed, 78-year-old executive who saw Arlington through a devastating fire in 1985 and more recently battled Illinois politicians over their approach to competitive riverboat casinos.
For his track--325 acres of lucrative property not far from O'Hare International Airport--and five off-track betting properties, Duchossois received more than 30% of the stock in the Churchill Downs company, which besides Hollywood Park and Calder includes three other tracks, off-track betting facilities and a horse-training and boarding facility.
Before Duchossois, the biggest Churchill shareholder had been Brad Kelley, the chief executive of Kentucky-based Commonwealth Brands, who owns about a million shares. Duchossois' involvement in a riverboat casino in Rosemont, Ill., could sweeten his Churchill Downs stake. Depending on the immediate success of the casino, he is eligible to be issued 1.25 million additional shares in Churchill, which was worth more than $28 million, based on Thursday's closing stock price.
Besides the stock, Duchossois and two of his appointees--one of them his son Craig--will be added to the Churchill Downs board. Duchossois becomes a member of the Churchill executive committee and will remain chairman at Arlington International, where Scott Mordell continues as president and chief executive.
Tom Meeker, chief executive of Churchill Downs Inc., and Stronach, whose track-buying spree started with the purchase of Santa Anita for $126 million in December of 1998, soft-pedal their rivalry, but with the future of racing firmly tied to the simulcasting of races to other tracks, the competition has been relentless.
Last month, Stronach announced that he is buying Bay Meadows Race Course in San Mateo, which will give his Magna Entertainment company ownership of three of the five major thoroughbred tracks in California. Besides Santa Anita, Stronach's other jewel is Gulfstream Park, a neighbor of Calder's in Florida. With Santa Anita and Gulfstream, Stronach has a stranglehold on the choice winter racing dates at both ends of the U.S.
Stronach, whose empire also includes tracks in Ohio, Oklahoma and Michigan, was traveling in Europe on Friday and couldn't be reached for comment. Magna Entertainment, a spinoff of Magna International, a world-wide auto-parts company that employs more than 54,000, enjoyed a good week, moving up another 50 cents Friday to close at $7.37. Churchill Downs Inc. was up 37 1/2 cents, to $23.06, at Friday's close.
In the late 1980s, after a fire destroyed the clubhouse and grandstand, Duchossois rebuilt Arlington, downsizing the plant to make it more intimate and comfortable, and attracting an audience younger than most tracks have been able to draw. He seemed to have found the formula for racing as a family entertainment.
But in 1997, Duchossois closed down the family-held track, frustrated with state politicos and saying that he couldn't coexist with the advantages that were doled out for other forms of gambling.
After two years of racing at the Chicago area's other tracks, Hawthorne and Sportsman's Park, Duchossois received enough political concessions to reopen in mid-May, when a crowd of more than 35,000 welcomed back Arlington. The current meet runs through Sept. 30, with the track's signature grass race, the Arlington Million, getting a purse boost to $2 million Aug. 19. Other than Breeders' Cup races, the Million has become the richest race on the North American schedule.
"We believe that Churchill Downs' business strategy and its commitment to excellence are aligned with our own operating philosophy," said Duchossois, who, like Stronach, also breeds and races horses. "We have the shared vision of dedication to customer service and a commitment to the live racing experience and the growth of simulcast sales."
In Arlington, Churchill Downs is acquiring a track that is worth an estimated $200 million. Duchossois, personally supervising a $10-million improvement program before this year's reopening, has incurred no debt along the way.
"Dick Duchossois has shown a true passion for our industry," Meeker said. "He's shown effective leadership while showcasing racing at Arlington."