08/15/2006 11:00PM

Churchill and Magna join Empire for franchise bid

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SARATOGA SPRINGS, N.Y. - Churchill Downs Inc. and Magna Entertainment, the two largest racetrack operators in the country, have joined Empire Racing Associates in its bid to secure the franchise held by the New York Racing Association, the companies announced Tuesday night.

Churchill and Magna, which operate a combined total of more than a dozen major tracks, will join a rapidly growing and diverse partnership headed by Empire, which was formed earlier this year by a group of New York political and business leaders. Empire has also struck partnerships with Delaware North, Woodbine Entertainment Group, and Scientific Games in an attempt to forge a formidable alliance to run racing at New York's three major racetracks for the next 20 years.

As part of the partnership agreement, Magna and Churchill will each receive a seat on Empire's 15-member board, which was expanded from 11 members as a result of the new partners. In addition, Magna and Churchill have each received an undisclosed equity stake in Empire, which so far has prohibited any partner from acquiring more than 8 percent of the company.

A state panel, the Ad Hoc Committee on the Future of Racing, has asked potential bidders for the franchise to respond to its request for proposals to operate Aqueduct, Belmont, Saratoga, and a casino at Aqueduct by Aug. 29. The committee expects to release its recommendations on the bids to the governor and legislature on Sept. 29. Any winning bid would have to be approved by both the legislature, which has already recessed for the year, and a new governor, who will take office in January.

Empire has embraced a business model for the tracks that would include a for-profit enterprise that envisions the legalization of slots at Belmont Park. The business model was largely developed by Friends of New York Racing, a nonprofit political advocacy group that was disbanded earlier this year just after Empire announced its formation.

All of Empire's business partners, including Churchill and Magna, had representatives on the board of directors of Friends of New York Racing, which was headed by Tim Smith, the former chief executive officer of the National Thoroughbred Racing Association. Smith and NYRA officials have had a bitter falling-out over Smith's role in advising and investing in Empire.

Magna and Churchill announced two weeks ago that they would partner on a bid. Magna or Churchill operates Churchill Downs, Santa Anita Park, Gulfstream Park, Arlington Park, Golden Gate Fields, Lone Star Park, Fair Grounds, Laurel Park, Pimlico Race Course, Calder Race Course, and a handful of other tracks.

Julie Koenig Loignon, a spokeswoman for Churchill, said that Churchill agreed to the partnership with Empire because "we see eye-to-eye with Empire's management on its vision for New York racing."

"We see them as being a very strong team with a lot of resident skill sets that will enable them to strengthen New York racing not just for the state's racing industry but for the parimutuel industry across the country," Koenig Loignon said.

The addition of Churchill and Magna has implications beyond Empire, which earlier this year received the exclusive endorsement of the New York Thoroughbred Horsemen's Association, the group representing owners and trainers at NYRA's racetracks.

With the two companies behind Empire, the racing industry is increasingly consolidating its efforts in a for-profit bid for NYRA's franchise, in opposition to NYRA itself. NYRA has advocated a not-for-profit model for the franchise, and the association's relationship with Empire and its supporters has become increasingly strained as the two groups lobby publicly and privately over the proper structure for New York racing.

Charles Hayward, the chief executive officer of NYRA, said the recent additions to Empire's bid "made for a strange group of bedfellows," and he questioned how Empire's diverse number of partners would agree on a plan to run NYRA's three racetracks. He also criticized Magna for its financial performance over the past four years - the company has lost $350 million while racking up hundreds of millions of dollars of debt - and then criticized Churchill for agreeing to sell Hollywood Park in Southern California last year to a real-estate development company.

"I don't know, first of all, how they are going to sort out how all these different parties are going to operate the tracks," Hayward said. "If you ask me, this is just a bunch of people trying to get a seat at the trough for slots revenue. How else do you explain it?"

Jeff Perlee, the executive director of Empire, did not return a phone call on Wednesday.

Churchill and Magna own the tracks that hold the first two legs of the Triple Crown, the Kentucky Derby at Churchill Downs and the Preakness Stakes at Pimlico Race Course. NYRA runs the third leg, the Belmont Stakes, at Belmont Park, and the three racing companies have hosted the vast majority of Breeders' Cup events.

Separately on Wednesday, Empire announced that Marylou Whitney, the Saratoga Springs socialite and horse owner, was named the honorary chairwoman of Empire Racing and has endorsed the group's business plan.