ISC, SMI looked to jointly purchase Dover in 2007

By Bob Pockrass - Associate Editor | Friday, October 09, 2009

Speedway Motorsports Inc. and International Speedway Corp. formed an alliance two years ago to look into the possible purchase of Dover International Speedway, according to a letter from Dover Motorsports Inc. general counsel to one of its shareholders.

The letter was sent last month to Mario Cibelli, managing member of Marathon Partners, which owns 16.3 percent of the company’s common stock (but only 1.5 percent of voting stock) and a harsh critic of Dover management who wants the company to be sold. In a filing Thursday with the U.S. Securities and Exchange Commission, Cibelli asks for a forum on issues pertaining to Dover Motorsports shareholders, and the letter is posted on the forum project’s Web site.

Dover general counsel Klaus M. Belohoubek writes in the letter that Cibelli’s actions might have thwarted the potential sale by driving down the asking price. A Dover spokesman said the company had no comment but did confirm the authenticity of the letter.

The letter states that on May 2, 2007, Dover Motorsports Chairman Henry Tippie, Belohoubek and other Dover Motorsports executives met with SMI Chairman Bruton Smith and now-ISC CEO Lesa France Kennedy in an airplane hangar in Dallas to entertain an offer to acquire Dover Motorsports, which also included Nashville, Gateway and Memphis tracks.

“Bruton Smith led the negotiations for the alliance,” the letter states. “He knew about the letter that you had sent that [previous] morning. He stated as follows at the meeting: ‘You know that there are only two buyers for your company and that they’re both sitting at this table. You have to do something. And you don’t have a choice but to sell to us.’

“Mr. Smith proceeded to offer to buy the company at market value with no premium. After about an hour of discussions, he offered an additional nickel per share. Why he chose to be so insulting is anyone’s guess, but the meeting adjourned shortly after this. But for your May 1, 2007 letter, we might have been able to negotiate a sale two years ago.”

ISC owns 12 tracks with 19 Sprint Cup points races, while SMI has 12 races at seven tracks. Only three tracks that host Cup events – Dover, Pocono and Indianapolis – are not owned by ISC or SMI.

SMI and ISC have a 50-50 interest in a company SMISC LLC, which owns Motorsports Authentics and conducts business through “certain other activities,” according to SEC filings. It is unclear whether ISC and SMI, if they bought Dover, would have kept the two Sprint Cup races there or moved one or both dates to one of their other tracks.

ISC spokesman Charles Talbert declined to comment on the specifics of the letter.

“We remain interested in acquisitions that make sense for our shareholders,” Talbert said.

Smith has bought several tracks in recent years, including New Hampshire Motor Speedway and Kentucky Speedway. An SMI spokesman declined comment.

“We continually seek to locate, acquire, develop and operate venues which we feel are underdeveloped or underutilized and to capitalize on markets where the pricing of sponsorships and television rights are considerably more lucrative,” SMI states in its annual report.

The letter is critical of many of Cibelli’s actions in the last few years, which Belohoubek writes include harassing phone calls, suggestions to sue NASCAR and a public auction of the company.

“We are continuing to run Dover’s business and doing our best to get to the other side of what is a very difficult economic cycle,” Belohoubek writes. “The liquidity needs of your fund do not enter into our decision making process.

“Selling at the absolute bottom of the market might be something you’d like to see us do, but we are not under any pressure to sell. We will continue to evaluate any acquisition offers that may be made from time to time. But you will not hear about any of them from us until we are in a position to make an announcement to all of our stockholders, not just to the loudest and most obnoxious ones.”