Churchill Downs Inc. (CHD) announced it will purchase Presque Isle Downs and Casino in Erie, Pennsylvania and Lady Luck Casino Vicksburg in Mississippi, from Reno, Nevada-based Eldorado Resorts (ERI). Churchill will pay $178.9 million for Presque Isle and $50.6 million for Lady Luck, for a total of $229.5 million in cash. The Lady Luck purchase should close in the second quarter; the Presque Isle purchase, conditioned on the completion of the Lady Luck sale, should close in the fourth quarter. The purchases depend on securing gaming licenses from the Pennsylvania Gaming Control Board and the Mississippi Gaming Commission, and a racing license from the Pennsylvania Horse Racing Commission.
Observers see the acquisition of Presque Isle Downs as giving CHD an entrée into a real money iGaming market. In fact, Churchill Chief Executive Officer Bill Carstanjen said, “Presque Isle will give us a foothold in Pennsylvania which has recently passed legislation authorizing real money online gaming.”
In addition, upon the announcement of the recent sale of Churchill subsidiary online/mobile gaming developer Big Fish to Aristocrat Technologies for $990 million cash, Carstanjen said, “We will refocus our strategy on our core assets and capabilities including growing the Kentucky Derby, maximizing our thoroughbred racing operations and expanding the casino segment, TwinSpires.com and other forms of real money gaming.” TwinSpires.com is the company’s online race wagering platform, which could transition into an online casino site as well.
Regarding the latest acquisitions, Carstanjen said, “We are excited about welcoming both of these properties to the Churchill family. The Lady Luck Vicksburg is immediately adjacent to our Riverwalk facility and offers us operational efficiencies in a stable region. Both properties fit our investment criteria and will be immediately accretive to our shareholders.”
ERI Chief Executive Officer Gary Carano added, “Our agreements to divest Presque Isle and Lady Luck Vicksburg are consistent with our strategy to maximize returns from our portfolio of regional gaming assets through investments in new properties as well as opportunistic divestitures. The sale price represents an attractive multiple of these properties’ trailing 12 months cash flows. We remain fully committed to expanding our platform into growth markets that we believe have the potential for high returns as well as deploying capital toward high return investments in our existing properties.”
The Carano family founded ERI in 1973 in Reno. Besides Presque Isle and Lady Luck, ERI owns and operates other gaming facilities in Ohio, Louisiana, Nevada, Pennsylvania and West Virginia.
Opened in 2007, Presque Isle remains one of a few tracks that still use an artificial main-track surface. The facility was opened as a racetrack/casino. Live thoroughbred racing started in September 2007; the venue conducts about 100 days a year. However, its primary business is casino gambling, with 1,600 slots, 32 table games and a poker room.
Lady Luck Vicksburg offers 620 slots and nine table games, and operates an 89-room hotel.
Churchill is best known for Churchill Downs, its namesake racetrack and home of the Kentucky Derby. It also owns four other racetracks plus six gaming properties with more than 4,200 slots and about 200 hotel rooms. Its online operations include TwinSpires.com, the largest legal U.S. online betting platform.
Churchill has nearly doubled the business between 2010 and now to a revenue base of $1.3 billion. A recent financial statement indicated for 2017 Churchill had net income of $140.5 million, up from $108.1 million in 2016. Revenue for the year was $882.6 million, up from $822.4 million in 2016. Racing revenue for 2017 was $276.6 million, up from $268.1 million in 2016. Twinspires.com generated $256.7 million in 2017, up from $222.9 million in 2016. Churchill said that handle through the operation was up 17 percent during the year compared to national handle on U.S. horseraces which increased 1.7 percent. Net revenue from casino operations in 2017 was $350.5 million, up from $332.8 million.
It is unclear whether Presque Isle Downs could be involved in the ongoing auctions for 10 mini-casinos sites in Pennsylvania. One of the sites in Lawrence Township is just outside the exclusion area for Presque Isle along the Ohio border.
Jefferies & Company analysts David Katz and Khoa Ngo said the purchase of Presque Isles and Lady Luck is “modestly positive” for both Churchill and ERI, “given that the markets were not strategically critical, the deals are valued at a level that is neutral but most likely margin-accretive.”
