Penn National Gets Its Way

- It didn't take long for Maine legislators to back off their proposal to hit up Penn National for an additional 1% of gross revenue on their Hollywood Slots project.

"We are grateful to the Legislature for hearing the concerns that we had about a [higher] tax rate and its effect on [Penn National’s Bangor operations] and the ripple effect it would have had on the economy," [a company spokesperson] said early Monday evening. [Bangor Daily News]

Ha! Penn National brought construction to a dead halt, and the Legislature, already addicted to the revenue from the temporary facility, was backed into a corner and had absolutely no choice. Didn't the lawmakers realize that Penn National had all the leverage in this situation? It's not too often that you see a single corporation holding all the cards against a government and causing them to capitulate with barely a peep. Whatsmore, Penn National said that it will now shift its focus to talks with lawmakers aimed at creating a "more stable and predictable environment for our $131 million investment." In other words, don't even think about fucking with us again!

- Frank Stronach and Magna will not be buying Chrysler, as Daimler has agreed to sell the automaker to Cerebrus, a private equity firm known for cutting its way to profit but vowing this time to retool and build. [LA Times] We'll see about that. Though the purchase price was announced at $7.4 billion, most of that money is to be invested in the company, and Daimler, after paying closing costs and loaning money to Chrysler, is basically paying Cerebrus to take the company and its massive pension obligations off of its hands.

What that makes that potentially relevant to us is that Frank Stronach is no doubt paying attention. His Magna Entertainment is another troubled enterprise with huge liabilities; in this case, a debt of over $500 million to its majority stakeholder MI Developments, the real estate company which is another Magna entity. And though Stronach also controls that company, he indicated he would not block efforts to sell or spinoff Magna Entertainment if its investors insist.

Some shareholders, particularly hedge funds, want MI to focus on steady real estate earnings and reduce or sell interests in the riskier MEC venture.

Stronach...told reporters he would not oppose a spinoff of MEC under the right circumstances. "I would not be a block," he said. "I want to find good solutions." [Toronto Star]

Stronach remains optimistic about the future - profits did rise in the first quarter, the company still has valuable "non-core" assets to sell, and there's hope for some friendlier regulations in Florida regarding ATM's as well as for slots in Maryland. But should the pressure to spinoff the company rise, I'd imagine it would be a similar deal to Chrysler in that just the shedding of debt would be the main attraction to MI. And if the buyer is a private equity firm like Cerebrus, they're going to take a look at the racing properties - including Gulfstream with its anemic daily take at its racino and its prime location - and evaluate them on a bottom-line basis.

But Frank is still trying, we'll give him that much, even if his efforts are sometimes misguided. He's proposed the idea of Instant Racing machines as an alternative to slots in Michigan, where he's proposed to build a new track under those circumstances; and the company has floated the idea of "life-changing" payouts of $10 million on a series of televised horse races. Personally, I think he has the right idea on both counts. I know he was ridiculed for those Horse Wizard machines, but I thought that was one of his better ideas. I'm highly in favor of using old races and/or any possible gimmick - especially lottery-type payoffs - to get people to sit in front of a TV or electronic gadget, and watch a race while having a stake in the outcome. I believe that's the only way we're ever going to attract new people to the sport, and it's a simple and relatively easy solution that I believe is being overlooked to the industry's detriment. I mean, if people will watch a bunch of dumb humans competing for big money amongst themselves in some asinine reality show, don't you think they'll take a couple of minutes to watch some dumb horses run around the track if they themselves can make big - or even not so big money on the outcome? Maybe?