06/17/2004 11:00PM

Buzz factor is pushing the price for Smarty

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LEXINGTON, Ky. - Negotiations for Smarty Jones's stud rights were still under way in central Kentucky on Friday afternoon, with four or five farms still in the running. Bloodstock market watchers predict that Smarty Jones, the Kentucky Derby and Preakness winner, could end up with a total stud value of between $35 million and $40 million - or more.

The hot competition for Smarty Jones reveals a stallion market that takes both bottom-line considerations and intangible factors like "buzz" into account, giving sellers like Smarty Jones's owners, Roy and Pat Chapman, a windfall.

Smarty Jones undeniably created a buzz in the general public in winning two legs of the Triple Crown, and bloodstock experts say that appears to be having an effect on the bidding of stud farms. A key sign is the willingness of farms to bid high even though the Chapmans have said they will not allow Smarty Jones to shuttle. Shuttling horses between the northern and southern hemispheres can almost double the number of mares a stallion breeds every year and help a farm recoup the horse's purchase price faster. Without that option, many farms would usually be inclined to spend less on a stallion prospect.

"Limiting the number of mares bred in a year theoretically has to affect a stallion's price in normal stallion negotiations," said Ric Waldman, who manages stallion operations for Overbrook Farm, home of Storm Cat. "However, what may be occurring with this horse is something that doesn't fit the customary, normal stallion negotiation. There's more buzz surrounding this horse, both in racing and breeding, than any horse I've seen since Secretariat."

The prestige of acquiring a highly desirable stallion prospect is one factor farms consider when they bid tens of millions for a horse. But ultimately, even prestige is part of a larger consideration: a stallion's bottom-line marketability.

"A famous horse or 'big horse' has a built-in advertising value that doesn't go away," said Lincoln Collins, a Lexington-based bloodstock advisor. "Coolmore, for example, still advertises Fusaichi Pegasus as a great Kentucky Derby winner."

Fusaichi Pegasus's total value was reportedly in the area of $60 million when his stud deal was completed in 2000.

Before making their offers, farms consider how popular a horse is likely to be with breeders and the potential stud fee they can charge, a number that could hit $100,000 or more for Smarty Jones. And while most stud managers would like to recoup a stallion's purchase price within three years, they often are willing to wait longer with a horse they think will have long-term commercial appeal.

"Breeders can't help but be somewhat charged up by the prospects of breeding to this horse," Waldman said. "This horse could very easily continue his popularity past the honeymoon year, year one."

Even without the shuttling option, some elite stud farms can afford to market a horse aggressively and carry a horse longer until he has proven himself at stud. As one industry insider put it, referring to Sheikh Mohammed al Maktoum's Darley organization, reputed to be a high bidder for Smarty Jones, "They can take a longer view than most. They can afford to make a very large capital investment and wait a longer time for it to pay off, but there's still some grounding in reality."

Collins said: "The overarching consideration in the way you make a deal in any competitive business environment is that, whoever you are, the deal has to work financially even if you have to aggressively push the envelope. No one is going to buy this horse just to buy this horse. It's axiomatic that everybody pays too much if their horse doesn't succeed, but if the horse does succeed, they've made a good deal."