With Pinnacle Entertainment’s $45 million acquisition of River Downs in November 2010, five of Ohio’s seven racetracks are now in the portfolios of casino companies, including all three of its Thoroughbred tracks. Pinnacle Entertainment (PNK: NYSE) owns seven casinos and hotels in Indiana, Louisiana, Missouri, and Nevada. Its Belterra Casino Resort & Spa is situated on the Indiana border with Kentucky about 60 miles southwest of Cincinnati and easily drivable from Lexington and Louisville.
Harrah’s Entertainment, the privately held global casino behemoth, agreed to acquire the bankrupt Magna Entertainment Corporation’s Thistledown near Cleveland for $89.5 million in September 2009, but exercised its option to back out when Ohio did not approve racetrack video lottery terminals. The price was renegotiated to $43 million and the deal went through in May 2010. Harrah’s also owns Louisiana Downs, Chester Racetrack (a harness track, near Philadelphia), and a half interest in Turfway Park in Florence, Kentucky just south of Cincinnati.
Penn National Gaming (PENN: NasdaqGS) is building two of Ohio’s four full-scale casinos—in Columbus and Toledo- that voters sanctioned in 2009. Penn National Gaming, which already owned Raceway Park, a harness facility in Toledo, bought the Columbus Thoroughbred racetrack Beulah Park in March 2010 for $37 million. Penn National Gaming owns 15 casinos and seven racetracks, four of which are racinos.
MTR Gaming (MNTG: NasdaqGS), with Thoroughbred racetracks in Chester, West Virginia and Erie, Pennsylvania, is another publicly traded company with a racing position in Ohio. Since 2002, it has operated the Standardbred track Scioto Downs in Columbus.
This flurry of racetrack purchases is predicated on the assumption that the Ohio Supreme Court will soon find video lottery terminals at the racetracks to be legally permissible under the existing authority of the Ohio Lottery Commission. The newly installed governor, John Kasich, has said he is not opposed to gambling but wants to review the matter. Like most states, Ohio has a deep budget deficit that taxes on slot machines could partially defray.
Ohio’s casinos will be up and running in the next few years in Cincinnati, Cleveland, Columbus, and Toledo. All but one of Ohio’s racetracks are located in these cities or their suburbs. If racetrack slots are approved and installed, as expected, the competition for customers in the four metro areas will be intense. Whether the Buckeye State can and will support so many pari-mutuel and gaming options is an open question. Penn National Gaming is reportedly considering the move of its two racetracks to other locations in Ohio to alleviate competition with its casinos. Moreover, two entrepreneurs say they intend to build a racetrack for Thoroughbreds in the Youngstown area,
Business at three Thoroughbred racetracks not far from the Ohio border will almost certainly be cannibalized—Mountaineer Casino Racetrack & Resort, Presque Isle Downs, and Turfway Park. The latter is in the most jeopardy because it will be less than a 30 minute drive from both the downtown Cincinnati casino and the River Downs racino on the Ohio River. Unless Kentucky law is changed with alacrity to allow Turfway Park to offer slots, it is difficult to see how the track can weather a burgeoning competitive onslaught from casinos and racinos in Ohio and Indiana.
Copyright © 2011 Horse Racing Business
Originally published in the Blood-Horse. Used with permission.