2002 - Harness Tracks of America, Inc.

HARNESS TRACKS OF AMERICA
Executive Newsletter
A daily fax and e-mail report on racing and gaming developments in North America and beyond
Stanley F. Bergstein, Editor
SCIOTO SOLD FOR $19 MILLION
MTR Gaming Group, which owns and operates
Mountaineer Race Track and Gaming Resort in
Chester, West Virginia, has agreed to buy Scioto
Downs in Columbus, Ohio, for $19 million. The
offer represented a 146% premium on Scioto
stock, which had been trading at $13, but after
announcement of the impending sale Scioto stock
zoomed upwards by 126%, to $29.50 in over-thecounter
trading. Scioto opened on October 9,
1959, the proud possession of popular beer distributor
Charlie Hill, who built it as a model track
with its soaring cantilever roof and interior materials,
including tile, that needed little maintenance.
Hill and his wife LaVerne were two of
HTA’s strongest supporters, never missing a
meeting, and LaVerne still maintains that record
after 43 years. She was awarded HTA’s Messenger
Award, the association’s highest honor, two
years ago, and is Scioto’s largest stockholder with
208,341 shares.
Under the sales arrangement, MTR Gaming
agreed to pay $32 a share for the track’s 595,767
shares, although stockholders were offered an
alternative of taking $17 a share up front with
10 annual contingent payments based on 10%
growth of Scioto earnings before interest, taxes,
depreciation and amortization. Closing is set for
next spring. MTR also plans to build a track in
Erie, Pennsylvania, and president Ted Arneault
said he will not back away from that commitment,
which is being challenged in court by Magna
Entertainment, which owns The Meadows
near Pittsburgh. MTR also owns the Ramada
Inn and Speedway Casino in North Las Vegas,
Nevada, and a Ramada Inn in Reno. Arneault
said the present Scioto management group will remain
in place, including president Ed Ryan.
Mrs. Hill is president of Mid- America
Racing Association, which splits the racing
season with Scioto Downs.
December 26, 2002
DETAILS OF MAGNA’S ERIE SUIT
The Magna Entertainment challenge to MTR’s
construction of a new track in Erie, in extreme
northwest Pennsylvania, was filed in Commonwealth
Court in Harrisburg, Pennsylvania’s state
capital. It is based on a claim that the Pennsylvania
State Horse Racing Commission granted
the license without giving Magna and other interested
parties an opportunity to challenge the
application. Magna says the new track, to be
called Presque Isle Downs, would damage the
Pennsylvania racing industry by diluting it, and
the site is not economically viable, two other race
tracks having died there. Magna contends the
license award was not supported by adequate
evidence, was arbitrary and capricious, and represented
an “abuse of discretion,” and is asking
the court to reverse the commission’s decision.
MTR’s decisions both to build Presque Isle
Downs and to buy Scioto are assumed to be based
on the clear likelihood of slots at tracks in Pennsylvania,
and the considerably longer odds on
that prospect in Ohio.
LAWYERS’ DAY IN IOWA, TOO
Big money is on the line in Iowa, too, and is in
court and possibly headed for the U.S. Supreme
Court. At issue is a 4-3 decision in the Iowa Supreme
Court last June, which ruled that the
state’s tracks should be taxed at the same 20%
rate as the state’s riverboat casinos, and not at a
sliding scale in the 30 percentile and heading
higher. After the decision the state’s tracks sued,
saying they are owed $112 million in refunds and
interest for tax overpayments since 1997. A Polk
county district judge is hearing the case, but state
officials, in a surprise move, are appealing the
Iowa decision to the U.S. Supreme Court, which
will decide in the next few months whether or
not it will hear the case. HTA’s member
Prairie Meadows seeks $53.7 million.