Magna Entertainment Will Buy Bay Meadows

Magna International Inc.’s Arcadia-based entertainment unit, split from the Canadian auto-parts firm earlier this year after some investors criticized Chairman Frank Stronach’s interest in horse racing, said Wednesday it agreed to buy the operator of the Bay Meadows racetrack in San Mateo, Calif.

Magna Entertainment Corp., which already has six racetracks, including Santa Anita Park in Arcadia, said it will pay $24.1 million for Bay Meadows Operating Co. The cash purchase could add to earnings next year, the unit said.

Magna International distributed 20% of the equity in its entertainment unit to shareholders and made it a separate company after some investors complained that Stronach was squandering the parent firm’s money on a hobby. Stronach, who is chairman of both the parent and the unit, is one of North America’s major racehorse owners.

Magna Entertainment’s latest purchase “gives them control of [horse racing in] the San Francisco Bay Area,” said Jacques Kavafian, an analyst at Yorkton Securities, who rates the company “accumulate.” “All in all it’s a good purchase.”

The transaction is expected to close in November.

In addition to Santa Anita and Golden Gate Fields, another track near San Francisco. Magna Entertainment owns tracks in Florida, Michigan, Ohio and Oklahoma.

Though Magna Entertainment is buying the Bay Meadows track’s operating company, PaineWebber Real Estate Group will retain ownership of the real estate. The PaineWebber Inc. group plans to build apartments and office buildings at the track site.

The acquisition agreement allows Magna to conduct racing at the track for two years after completing the purchase.

The California Horse Racing Board has approved the purchase.

Magna Entertainment said it will ask the board to let it move some racing dates to Bay Meadows from Golden Gate while it makes improvements at Golden Gate.

In the first half of this year, Magna Entertainment accounted for $135 million, or 2.6%, of Magna International’s $5.26 billion in sales and for $26 million, or 5.5%, of the parent’s $469 million in operating income.

Magna Entertainment’s shares rose 6 cents to close at $6.69 Wednesday on Nasdaq. They have more than doubled since trading began Feb. 23.

Magna International’s U.S. shares fell 31 cents to close at $48.56 on the New York Stock Exchange.

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In the Race

The stock of Arcadia-based racetrack operator Magna Entertainment has more than doubled since it was spun off from its auto-parts maker parent Magna International in February.

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Magna Entertainment (MIEC),

weekly closes and latest on Nasdaq

Wednesday: $6.69, up 6 cents

Source: Bloomberg News