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Marathon Partners Sends Letter to the Board of Dover Motorsports
Expresses Serious and
Significant Concerns with the Proposed Merger of Dover Motorsports with
Dover Downs Gaming & Entertainment
Urges the Board to Terminate the Merger and Conduct an Open and Robust
Exploration of All Available Strategic Alternatives
NEW
YORK, Oct. 8 /PRNewswire/ -- Marathon Partners L.P. ("Marathon Partners")
today announced that it delivered a letter to the Board of Directors of
Dover Motorsports, Inc. (the "Company") (NYSE: DVD) expressing its serious
and significant concerns with the proposed merger of the Company with
Dover Downs Gaming & Entertainment, Inc. ("Dover Gaming"). In the letter,
Marathon Partners questioned the adequacy of the merger consideration to
be received by shareholders of the Company and the flawed process tainted
by conflicts of interest that was conducted by the Company to arrive at
such an inadequate valuation and value destroying transaction.
Marathon Partners called on the Board to immediately terminate the merger
with Dover Gaming and conduct an open and robust exploration of all
strategic alternatives available to the Company.
Mario D. Cibelli, managing member, stated, "It is clear that this proposed
merger is not the result of a sound process conducted by a disinterested
Board and team of advisors aimed at delivering immediate liquidity and
full and fair value for all of the Company's shareholders. Instead, it
appears that this ill-advised transaction is nothing more than a mechanism
for Chairman Henry Tippie to prolong his value-destroying dominion over
the Company. If this Board had any interest in protecting the best
interests of all shareholders, it would immediately terminate the proposed
merger and conduct an open and robust exploration of all available
strategic alternatives, including an open auction process, to achieve
maximum value. We believe such a process could result in acquisition
offers from certain logical buyers, including International Speedway
Corporation and Speedway Motorsports, that, if consummated, could yield
significantly more value than the merger."
Mr. Cibelli continued, "Given the inherent conflicts of interest that cast
doubt on this transaction, including Mr. Tippie serving as Chairman of
both companies and that both companies engaged the same financial and
legal advisors, we cannot help but wonder what type of flawed process the
Company conducted to arrive at such an inadequate valuation and
ill-conceived transaction. To that end, Marathon Partners will be
submitting a demand to review and inspect certain Books and Records of the
Company pursuant to Delaware law relating to the proposed merger so that
we may better understand the nature of the process that led to the signing
of the merger and so we can investigate the possible breach of fiduciary
duties by the Board."
The full text of the letter follows:
Dear Members of the Board of Dover Motorsports, Inc.:
As the largest outside shareholder of the Company, we are writing to you
to express our serious and significant concerns with the proposed merger
of Dover Motorsports, Inc. (the "Company") with Dover Downs Gaming &
Entertainment, Inc. ("Dover Gaming") announced on September 27, 2010 (the
"Proposed Merger"). Based on our review of the Merger Agreement, we
believe the proposed consideration to be received by shareholders of the
Company is grossly inadequate and significantly undervalues the Company.
We are strongly opposed to the Proposed Merger and believe the Company
should instead immediately engage in a fair and robust exploration of all
strategic alternatives available to the Company, including conducting an
open auction process, in order to maximize value for shareholders.
Given the steep discount to fair value the Proposed Merger places on the
Company, we cannot help but wonder what type of flawed process the Company
conducted to arrive at such an inadequate valuation and value destroying
transaction. We see no evidence that the Board of Directors formed a truly
independent special committee to fully and fairly review strategic
alternatives available to the Company or that the Board took any steps to
ensure the best interests of all of the Company's shareholders were
protected and value was maximized. In fact, the Board employed the same
financial and legal advisors used by Dover Gaming to counsel the Company
with respect to the Proposed Merger. Is it any wonder that shareholders
are set to receive such inadequate value for their investment? We are
evaluating such potential conflicts of interest and are currently
evaluating any and all legal options to ensure that the Company does not
seek to consummate this value-destroying transaction when better
alternatives for shareholders to realize full and fair value for their
shares exist.
Up until now, we believe the current Board has shown a complete disregard
for the best interests of all shareholders and its fiduciary duty to
maximize shareholder value. We are currently evaluating all legal options
and reserve our rights to take any action necessary to ensure that the
Company is once and for all run in a manner that is consistent with the
best interests of all shareholders.
We also have serious questions about the wisdom of the Proposed Merger
from a strategic standpoint. As you are aware the combined company would
maintain the same management team, led by Chairman Henry Tippie. Over the
past 8 years, Mr. Tippie and his management team have driven the Company's
shareholders' equity from more than $156 million to approximately $56
million. Shareholders have suffered a staggering 68% decline in share
price over the same period. Given his disastrous tenure as Chairman of the
Company, we fail to see how simply merging the Company and Dover Gaming
while Mr. Tippie and his management team remain at the helm provides any
value to shareholders of the Company.
Further, we see significant uncertainty regarding Dover Gaming's business.
With Maryland casinos coming online and additional casinos in Delaware
being considered, in addition to potential increases in Delaware's take of
casino winnings, we see Dover Gaming's profitability coming under
increasing pressure in the future. Yet the Board seeks to transfer this
risk to the Company's shareholders through the Proposed Merger without any
type of premium. We wonder why the Board is seeking to unnecessarily
burden shareholders with risks that are outside the purview of the
Company's operations for minimal consideration.
We believe it is imperative that the Board demonstrate to shareholders
that it is committed to maximizing value. Based upon the feedback we have
received to date from other shareholders, it should be clear to the Board
that a majority of the minority of the Company's shareholders will not
support the Proposed Merger. To this end and to avoid continuing to incur
unnecessary expenses, the Board should terminate the Proposed Merger and
conduct an open and robust exploration of all available strategic
alternatives, including an open auction process, to achieve maximum value
for shareholders. We believe there are parties interested in acquiring the
Company for significantly more value than shareholders stand to receive
through the Proposed Merger. These parties should be able to participate
in, and shareholders should be able to benefit from, a fair and open sale
or merger process.
We believe that the Board has an opportunity to reverse the long steep
decline in shareholder value. By conducting an open and robust exploration
of all available strategic alternatives, including an open auction
process, the Board can demonstrate to shareholders that the Company is not
being run simply for the benefit of Mr. Tippie and management. Unless and
until the Board can do so, we remain vehemently opposed to the Proposed
Merger and will vigorously campaign against its approval. Rest assured we
will do all that we can to ensure that shareholders receive the maximum
value for their investment in the Company.
Sincerely,
Mario D. Cibelli
Managing Member
Contact:
Marathon Partners L.P.
Mario Cibelli or Eric Hidy,
212-490-0399
SOURCE Marathon Partners L.P.
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