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The News Journal (delawareonline), October 5, 2010 article


Dover merger hits opposition

Proposal would combine gaming, motorsports companies

By AARON NATHANS The News Journal October 5, 2010


Dover Downs and Dover Motorsports would merge under a proposal that has drawn the ire of large minority shareholders, who say the motorsports company should be sold to major racing companies to let shareholders reap more value.

Barry L. Lucas of Gabelli & Company Inc., an analyst affiliated with one large minority stakeholder, said it might make sense to close Dover International Speedway and move the two major NASCAR races there to Las Vegas and Chicago.

Gabelli is affiliated with GAMCO Investors, the second-largest owner of Dover Motorsports stock outside of the company's directors and officers.

Both companies have been slumping lately. Dover Downs Gaming & Entertainment Inc., which operates a casino, hotel and horse track, has faced an economic downturn, more competition in nearby states and a higher state share of revenues. That has lowered earnings 42 percent in the most recent quarter, despite the addition of table games, limited sports betting and a larger hotel.

Dover Motorsports has dealt with declining attendance, and disappointing results at tracks it purchased outside Delaware. During the most recent quarter, the firm reported a $1.7 million loss, largely as a result of its decision to discontinue NASCAR racing at its Gateway track in St. Louis in 2011.

Both companies have debt to pay down, and combining them could give the combined company a better arrangement with banks, said Denis McGlynn, president and CEO of both companies.

"With what's gone on in the marketplace, not just stock market world, but the economy, it just makes sense at this time," McGlynn said.

Mario Cibelli, managing member of Marathon Partners, the largest minority shareholder of Dover Motorsports, said it "is not a deal that's in the best interests of the shareholders."

Cibelli is urging the board of directors to sell the company, pointing to declining shareholder equity and operating losses at the Midwest tracks.

"It's easy to be a third baseman once the game's over," Mc-Glynn said.

Under the proposed deal, announced last week by the two companies, Dover Downs would purchase the motorsports company, which would continue as a subsidiary and be delisted from the New York Stock Exchange.

Motorsports stockholders would receive .501 shares of Dover Downs Gaming stock for each share they own of Motorsports, the companies reported.

There will be two votes on the proposed merger, said Klaus M. Belohoubek, general counsel for both companies. The first will be by all shareholders; the second will exclude the company's officers and directors, he said. This was arranged at the recommendation of the company's attorneys, since one man, Henry Tippie, owns more than 50 percent of both companies, he said.

The deal must ultimately be approved or rejected by a majority of the minority shareholders, Belohoubek said.

The two companies were one until 2002, when analysts and shareholders who liked one side or the other urged them to split. Merging them now makes sense to trim administrative and regulatory expenses, McGlynn said.

Shareholders will get information in coming weeks, and a meeting will be held in mid-December, followed by a vote, McGlynn said.


Contact Aaron Nathans at 324-2786 or

Gannett Co., Inc.



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