Racing into position, Dover Downs Entertainment Inc. on Friday agreed to buy Grand Prix Assn. of Long Beach Inc. in a $90-million stock-and-cash deal that would make Dover one of the biggest operators of motor sports in the U.S.
The combination would create an entertainment and sports powerhouse. It would also expand the Dover, Del.-based company to include ownership and operation of 15 major Indy-style and NASCAR motor sports events and a number of other races in 31 of the top 50 U.S. advertising markets, the company said.
"We'll have importance and relevance to television carriers and advertisers," said Dover President Denis McGlynn. "We'll be one of the big boys."
Auto racing and other motor sports have skyrocketed in popularity over the last decade. Given the exorbitant costs of constructing a new track--$75 million to $130 million--analysts say Dover is looking to consolidation in order to grow.
"Tracks are expensive upfront, but with relatively low operating costs. The more events you put on the track, the more you spread the cost," said analyst Dennis McAlpine at Josephthal & Co. in New York.
Operating multiple tracks gives companies leverage with the auto racing governing bodies, analysts said. By demonstrating they can handle large crowds and other complex logistics, owners can attract prestigious and profitable events.
"You need a track record of success to get race dates from the sanctioning bodies," said Scott Barry, a leisure and entertainment analyst for Raymond James in St. Petersburg, Fla.
The company's flagship Delaware site currently draws fans from Philadelphia, New York and Washington. Dover also owns and operates Nashville Speedway, USA, in Nashville.
Dover would acquire the three courses and races owned and operated by Long Beach-based Grand Prix Assn., including the popular temporary street course that serves the annual Toyota Grand Prix of Long Beach. The 24th annual race will be held April 3 to 5 and is expected to draw more than 200,000 spectators over the three days.
Grand Prix is also the owner and operator of Gateway International Raceway in Madison, Ill., and Memphis Motorsports Park in Tennessee.
"We're pleased to be involved with a company with very little debt and good cash reserves," said Christopher Pook, Grand Prix chairman and chief executive.
Grand Prix zipped up 75 cents to close at $17.13 on Nasdaq on Friday, and shares of Dover dropped 31 cents to $28.75 on the New York Stock Exchange. Grand Prix went public at $10 a share in June 1996.
Under terms of the deal, Grand Prix shareholders would receive .63 of common stock in exchange for each Dover share, subject to adjustment if Dover's closing price is greater than $32 or lower than $21. Shareholders must approve the deal, which is expected to close in June.
As part of the agreement, Dover Downs also purchased International Speedway Corp. and Penske Motorsports Inc.'s combined interest of 14.6%, or 680,000 shares, in Grand Prix for $15.50 a share, or $10.5 million.
No Grand Prix employees are expected to be laid off once the merger is completed, the companies said. Grand Prix would retain its name and operations, and Pook would remain CEO.