Churchill Downs buying Ellis Park for $79 million

Churchill Downs Inc. has reached an agreement to buy Ellis Park in Henderson, Ky., for $79 million, the company announced late on Thursday, an acquisition that will further consolidate ownership of Kentucky racetracks and casinos under the Churchill umbrella.

The acquisition will separate Ellis Park and its small casino from Laguna Development Corporation, an investment arm of the Laguna Pueblo tribe that has struggled to live up to its promises when it purchased Ellis in 2019. In addition, it will give Churchill ownership of four tracks in the state – Ellis, Churchill in Louisville, Turfway in Northern Kentucky, and Oak Grove, a harness track near Ft. Knox – and remove a competitor for a casino location in southwestern Kentucky.

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In the announcement, Churchill said that the purchase agreement includes Laguna’s plans to construct a casino in Owensboro, Kentucky. Laguna’s plans for the casino, to be located in a strip mall, were approved last year by the Kentucky Horse Racing Commission, but not until after commissioners grilled the company’s officials over their unmet expectations for the company’s investment in Ellis Park.

Ellis Park, known as the “Pea Patch,” celebrated its 100-year anniversary this year. It is located just south of Evansville, Indiana, in the far west of the state. The track conducts racing during Kentucky’s summer months, and in recent years it has received subsidies from Kentucky Downs to boost its purses to levels that kept some Kentucky horsemen from traveling out-of-state for racing opportunities.

All of Kentucky’s tracks now operate casinos, and those casinos have been generating subsidies for racing purses that have driven the state into the top echelon of racing circuits in the country. Ellis’s on-track casino has 300 historical horse-racing machines, and the returns from the casino have been the lowest in the state. The plans for the Owensboro location include 600 machines.

While initially balking at the operation of the machines, Churchill Downs has become a major backer of historical horse-racing machines after its first casino, located at its Trackside training center in south Louisville, quickly exceeded all expectations. Two years ago, the legislature formalized the legality of the machines, and Churchill has since pursued “auxiliary” licenses to expand the number of casinos it operates in the state while also reaching an agreement to purchase Turfway Park.

In fiscal year 2022, which ended in June, Ellis had handle of $209.8 million at its on-track casino, compared to $2.06 billion at Churchill’s Trackside location and $1.42 billion at Churchill’s Oak Grove, according to Kentucky Horse Racing Commission records.

In a release, Churchill officials said that they anticipated raising purses at Ellis as a result of the acquisition, but the company did not provide details. At Turfway Park, Churchill immediately doubled purses after buying the track in late 2019 while embarking on a teardown and rebuild of the track’s grandstand to accommodate 850 machines.

“Our team is committed to building a summer meet at the ‘Pea Patch’ that keeps more Kentucky-bred horses and Kentucky-based trainers in their home state while attracting top horse racing talent from across the country to the Bluegrass State each July and August,” Bill Carstanjen, the chief executive officer of Churchill, said in the announcement.

The transaction will need to be approved by the Kentucky Horse Racing Commission, which has been a willing partner with racetracks in the pursuit of casinos. Churchill said in its announcement that it expects the deal to close “shortly” after approval.

Laguna Development had pledged to spend $100 million on improvements to Ellis Park and its casino when it purchased the track from Ron Geary three years ago for $11 million. The track and casino at that time were losing money. But Laguna said that temporary closures of its casinos in New Mexico in 2020 because of the pandemic had severely limited its cash flow, resulting in its plans for Ellis being put on the backburner.

Horsemen complained frequently during the last two years that the company had not lived up to its promises. Recently, the KHRC approved a plan to use money from its own backstretch improvement fund to install air conditioners in Ellis’s backstretch dormitory rooms.