Purchase Means Racing as Usual

Churchill Downs, fresh from running the Kentucky Derby for the 125th time, bought Hollywood Park on Thursday--lock, stock and nearby casino--and in discussing the dynamics of the $140-million deal, Tom Meeker, president of Churchill Downs, used an analogy about two drivers arriving at an intersection at the same time.

“We’re both stopped,” Meeker said of the two cars. “[R.D. Hubbard] turns right, and Churchill Downs turns left, but before we do, the drivers make a transaction that’s beneficial to both companies.”

Six years ago, there was talk between Hubbard, the chairman of Hollywood Park, and Meeker of merging the tracks.

Since then, however, Hubbard’s company has focused on casinos and riverboat gambling, rather than horse-race betting.

Churchill Downs’ door is still open to casinos, but lately it has been borrowing to buy racetracks. Thursday’s cash deal comes on the heels of Churchill’s purchase, for $86 million, of Calder Race Course near Miami. And last year, Churchill Downs bought Ellis Park in Henderson, Ky.

What the latest Churchill Downs purchase means to horsemen and horseplayers in Southern California is that live racing will continue at Hollywood Park. There had been intermittent talk about running all of the Southland’s major racing dates, with the exception of the seven-week hiatus at Del Mar, at Santa Anita.

“We’re a racing company,” Meeker said. “This is good for racing and great for Hollywood Park.”

Hubbard, Hollywood Park’s largest shareholder with more than 10% of the stock, echoed Meeker’s comment.

“Racing will continue here and will be a viable thing,” Hubbard said. “I can assure you that this will be the case.”

Had Churchill Downs been able to buy Santa Anita--rival Frank Stronach and his Magna International bought the cross-town track in December for $126 million--the negotiations between Hubbard and Meeker, which took a serious turn more than a month ago, probably would never have begun.

Stronach also looked at Hollywood Park, but thought the asking price was too high. There were unconfirmed reports Thursday that Stronach was homing in on another track with a for-sale sign--Gulfstream Park in Hallandale, Fla.--but he couldn’t be reached for comment.

“It was important that Churchill Downs’ purchase of Hollywood included the casino,” said Rick Cowan, a Stronach-appointed vice president at Santa Anita. “From what [Stronach] could tell, it’s been the [casino] that’s keeping the whole place afloat.”

Although casinos are the engine that drives Hollywood Park Inc., the racetrack’s parent company, simulcasting and the potential of betting on horses from home fuel Churchill Downs’ strategies.

“We hope to unveil a whole new simulcasting program by next year,” Meeker said. “It will offer continuity and high-quality production values. It will be more user-friendly. Right now, simulcasting is a price-driven business. We want to make it customer-driven. By buying Hollywood Park, Churchill Downs will be positioned to be the premier racetrack operator and simulcast broadcaster in the U.S.”

Besides Calder and Ellis Park, also under the Churchill Down umbrella are Hoosier Park in Anderson, Ind., a track that runs thoroughbreds and standardbreds; and Kentucky Downs, formerly the Dueling Grounds, in Franklin, Ky., which is a simulcast facility for all but seven days a year.

With Hollywood Park, Churchill Downs tracks will be able to offer more than 450 racing dates a year. The only months a Churchill Downs facility won’t be running are February and March, and four months a year there will be four Churchill Downs tracks overlapping.

Meeker said he couldn’t comment about whether Churchill Downs is in the market to buy more tracks. Hubbard said that there are no plans for Hollywood Park Inc. to sell Turf Paradise, the Phoenix track his company owns.

Thursday’s deal, which is expected to close in August, calls for Churchill Downs to acquire 240 of the 378 acres at Hollywood Park. The casino, which was part of the sale, will be leased by Churchill Downs to Hollywood Park Inc. for $3 million a year. Hubbard said that Hollywood Park Inc.--whose name will eventually be changed to match one of its casino-hotels--hopes to develop the remaining acreage.

Hollywood Park Inc. operates eight casinos and two card clubs in California, Nevada, Mississippi, Louisiana, Arizona and Argentina. The company also has been approved for a riverboat gambling license on the Ohio River in Indiana, and has begun development of a hotel, casino and golf resort in Indiana, 35 miles from Cincinnati.

Hubbard, who said his participation in racing as a horse owner and breeder might increase without the day-to-day responsibilities of a track executive, took over at Hollywood Park in 1991, after chairman Marje Everett was ousted in an acrimonious proxy fight. Three years later, Hubbard, foreseeing that racing had to join forces with, rather than battle, rival gambling interests, opened the Hollywood Park Casino on the track grounds.

“When I came in, it was time for a change,” Hubbard said. “Now it’s time for another change. There have been a lot of ups and downs, but overall I’m pleased with what our employees have accomplished. There’s been confusion on Wall Street about whether Hollywood Park is a racing company or a casino company. This deal answers that.”

The bottom line for Hollywood Park was red ink in 1995 and 1996, but the company showed total profits of $22 million in 1997-98. Churchill Downs’ net earnings have increased marginally the last three years, to $10.5 million in 1998. A new casino riverboat has opened only 16 miles from Churchill Downs, and although riverboats can be hemlock for racetracks, Meeker is bullish about racing and simulcasting.

Hollywood Park’s stock, which jumped almost 10% Monday to close at a 52-week high of 14.25, closed Thursday at 13, off 50 cents from the day before. Churchill Downs closed Thursday at 32.25, down 25 cents.

STILL BITTER: Former Hollywood Park head Marje Everett welcomed arrival of Churchill Downs as new owner of Inglewood track. Page 14