Churchill to buy Presque Isle

Churchill Downs Inc. has reached a deal to buy Presque Isle Downs and Casino in Erie, Pa., the company announced Wednesday after releasing its 2017 financial results.

Churchill will pay $178.9 million in cash to buy Presque Isle from El Dorado Resorts, according to a press release sent out by El Dorado. In addition, Churchill is buying a casino in Vicksburg, Miss., from El Dorado, with that acquisition costing $50.6 million in cash, for a total of $229.5 million.

Presque Isle, which opened in 2007 and is one of only a handful of tracks that still uses an artificial main track surface, races approximately 100 days a year, but its main business is casino gambling, with 1,600 slots and 32 tables games. Churchill said that it expects the transaction to close in the fourth quarter of 2018.

Perhaps because of the expectation that the transaction will not close until near the end of the year, Churchill officials had little to say about the acquisition on a conference call Thursday morning. Bill Carstanjen, CDI’s chief executive officer, noted that the Pennsylvania legislature last year legalized online gambling operations runs by the state’s casino licensees, signaling that Churchill intends to launch an online casino site in the state after taking control of the property.

The Presque Isle acquisition is Churchill’s first foray into Pennsylvania, where lucrative subsidies from casino gambling go to racing purses. Churchill also owns its namesake track in Louisville, Ky.; Arlington Park outside Chicago (which also has an artificial surface, and frequently draws entries from horses who have raced at Presque Isle); and Fair Grounds in New Orleans. Churchill also leases out the racing operations of the former Calder Race Course in Miami – known as Gulfstream Park West – to a competitor, The Stronach Group, while still operating the facility’s casino.

For 2017, Churchill had net income of $140.5 million, according to its financial statements, up from $108.1 million in 2016. Revenue for the year was $882.6 million, up from $822.4 million in 2016, the company said. The fullyear revenue and net income figures do not include numbers produced by Big Fish Games, a mobile gaming company that Churchill reached an agreement to sell late in 2017 for $990 million in cash. The transaction to sell Big Fish closed early this year.

The 2017 figures included a $57.7 million “provisional benefit” recorded in the fourth quarter of the year “primarily related to the re-measurement of our net deferred tax liabilities” because of the massive corporate tax cut contained in federal legislation passed late in 2017, the statement said. On the conference call, Churchill said that the proceeds from the Big Fish sale and the benefit from the tax cut will be used to pursue additional share buybacks.

According to financial statements, racing revenue for the year was $276.6 million, up from $268.1 million in 2016. A portion of the increase was attributable to $8.5 million in additional revenue generated during Kentucky Derby week, according to the statement.

Revenue for Twinspires.com, Churchill’s account-wagering company, was $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, but company officials acknowledged during the conference call that the acquisition of a competitor, BetAmerica, in April 2017, accounted for approximately half of the handle gain.

Net revenue from casino operations in 2017 was $350.5 million, up from $332.8 million, Churchill said.