10/18/2016 12:35PM

Stronach group buys historical racing company

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The Stronach Group, the racing company controlled by owner-breeder Frank Stronach, purchased the historical racing machine operator RaceTech earlier this summer, top officials of the companies confirmed on Tuesday.

The acquisition, which was first reported by the Blood-Horse, closed in July, according to Louis Cella, part of the family that founded RaceTech in 2000, and Steve Keech, an executive vice president of The Stronach Group.

Neither Cella nor Keech would disclose the acquisition price, but both said The Stronach Group did not have any stake in RaceTech prior to the transaction closing. The bet-processing company AmTote had a role in the development of the devices before being purchased by a company controlled by Stronach in 2003.

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Cella called the sale of RaceTech, “An amicable transaction.”

RaceTech develops and operates so-called historical-racing machines, which use the results of previously run horse races to generate random numbers determining payouts on devices that operate like slot machines. The machines are legal in Arkansas, where the Cella family owns Oaklawn Park, and in Kentucky, Oregon, and Wyoming. The Stronach Group owns Portland Meadows in Oregon, which operates several hundred of the machines.

Keech said that RaceTech has been folded into a unit at The Stronach Group that had developed its own devices based on previously run races.

“This purchase was undertaken because of its fit with the long-term commitment [The Stronach Group] has to horseracing,” Keech wrote in an e-mailed response to questions. “Historical horseracing gives the racing industry increased content monetization opportunities.”

A portion of the proceeds from historical-racing machines have been used to boost purses at the racetracks where they are in operation, sometimes with dramatic results. However, some large racing companies, such as Churchill Downs Inc., have been reluctant to embrace the machines because of concerns that support for the devices would weaken efforts to legalize traditional slot machines, which have much higher returns per machine, especially when deployed in competitive casino markets.

RaceTech is embroiled in lawsuits with a company, Encore Racing, launched in 2015 by Kentucky Downs and other partners that manufactures and operates its own historical-racing machines. Kentucky Downs, which is located close to the border of Tennessee, has become one of the most lucrative locations for historical-racing machines.

The Stronach Group is expected to continue to pursue those lawsuits, Cella and Keech said.

“There are a lot of lawsuits out there, and [The Stronach Group is] better positioned to maintain those lawsuits and all the appeals to the end” than the Cella family, Louis Cella said.

The legality of the machines has been questioned in several states. In Kentucky, a conservative anti-gambling group continues to challenge the legality of the machines, which were legalized through the rule-making process of the Kentucky Horse Racing Commission, rather than by legislative vote.