05/21/2012 5:29PM

IEAH selling pinhooking operation

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The American Basketball Association, a publicly traded company that operates a league of 90 independently owned basketball teams, has signed a letter of intent to acquire the pinhooking operation of IEAH Stables, the former owner of 2008 Kentucky Derby winner Big Brown, according to the two sides.

Joe Newman, the chief executive of the ABA, said the transaction would be a mix of cash and stock, but he would not provide the terms of the deal, citing restrictions on publicly traded companies during due diligence. ABA currently has 26 million shares outstanding, priced at six cents a share, according to the company's financial records, for a total market capitalization of $1.56 million.

Newman said that he has been friends with Michael Iavarone, the managing partner of IEAH, since the two worked together as brokers at a Long Island brokerage company, Joseph Dillon and Co. Iavarone worked there for several years in the early 2000s, before striking out on his own as a day trader and then launching IEAH.

Before being employed by Joseph Dillon, Iavarone was suspended from trading securities for 10 days by national securities regulators while working at A.R. Baron, which was shut down in 1997 after the company was charged with one count of enterprise corruption.  Iavarone was not charged with a crime.
Under the deal, Newman said ABA will retain IEAH as the manager for the pinhooking operation, which IEAH launched in 2009. Pinhookers acquire yearlings, typically at auction in the late summer and fall, and then resell them the next spring during the juvenile auctions.

"Other than ABA owning it, it will be business as usual," Newman said. "Our goal is to further capitalize the business, so they can expand it."

The ABA operates the American Basketball League and markets the league's merchandise and related businesses, according to the company.

IEAH was a leading owner in 2008, the year that Big Brown won the Derby, the Preakness, and the Haskell Invitational. Later that year, the company sold the horse's breeding rights to Three Chimneys Farm in Central Kentucky, where he stands for $35,000.

The company had big plans to leverage its success with Big Brown into a much larger racing stable, but those plans have failed to materialize, and over the past several years, the company has struggled to maintain a racing stable. In 2009, the company built an equine hospital near Belmont Park, but the hospital was closed last year.

Last year, the pinhooking subsidiary sold Union Rags, one of this year's top 3-year-old colts, for $390,000. The colt was purchased as a yearling by IEAH for $145,000. A year earlier, the company had sold a Smart Strike colt for $825,000 after purchasing the horse as a yearling for $200,000.

 

Brian More than 1 year ago
its a way to tap the public debt and equity markets to fund future growth of the pinhooking operation without it having to file a separate public company. I am sure it is just the beginning of several acquisitions to follow.
T Cs More than 1 year ago
shaking my head