05/19/2011 1:39PM

Penn National close to exiting Pimlico-Laurel interest

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Penn National Gaming Inc. is close to completing a deal to sell back its 49-percent stake in Pimlico Racecourse and Laurel Park in Maryland, a company official said on Wednesday.

The stake will be purchased by either the tracks’ current majority owner, MI Developments, or Frank Stronach, according to Eric Schippers, a spokesman for Penn National. Stronach, the chairman of MI Developments, is scheduled to take possession of all the racing and gambling assets of MI Developments on June 30, in a deal that will prohibit MI Developments from offering any financial assistance to the transferred properties or its holding company.

“We are very close to the deal, and we expect to announce something soon,” Schippers said. “Right now it’s either MI Developments or Stronach, and it’s just a matter of whose face is on the cover.”

Officials of MI Developments did not return phone calls.

The sale of the stake will allow Penn National to extract itself from an investment that soured shortly after the company spent $50 million to buy into the tracks’ holding company, the Maryland Jockey Club, midway through 2010. With the investment, Penn was hoping to steer a casino license to Laurel Park, but those efforts failed when voters shot down a November referendum supported by the racing industry that would have overturned zoning approvals for a planned casino approximately 10 miles from Laurel.

Penn then threw its support behind a plan to close Laurel and slash live racing dates for 2011, a move that generated ill will from the state’s horsemen and put Penn at odds with Stronach, who said shortly after the plan was announced that he would not allow Laurel to close.

In a deal reached with the state, the tracks ultimately agreed to 146 live racing dates for 2011, but only after Gov. Martin O’Malley promised the tracks a share of the state’s casino revenues for operating subsidies.

Under a law passed this year that ratified the agreement, the tracks cannot receive the subsidies until the Maryland Jockey Club reaches a deal with Rosecroft Raceway, a harness track, on simulcasting revenue. Penn purchased Rosecroft for $11 million shortly before the law was passed, and so the company was required under the law to either sell its stake in the Maryland Jockey Club or recuse itself from the negotiations.

The two sides have until July 1 to reach a deal on the simulcasting revenue. If a deal is not reached by that date, either one of the sides can request arbitration. Under the law, as long as the request for arbitration is made, the casino subsidies will be released to the tracks.

Penn, one of the largest gambling companies in the United States, already operates a casino in Maryland, at a location in Perryville. Although current Maryland law limits a company to one casino license, the company has been lobbying legislators to change the law so that it can open a casino at Rosecroft.