Churchill Downs Incorporated (CDI) is in the final stages of acquiring the Oxford Casino in Maine after the former entered into a definitive purchase agreement for total consideration of around $160 million, an amount that is expected to be paid in cash. Considering that the Oxford Casino only opened in June 2012 and completed an expansion of its gaming floor in October 2012, the deal can either be interpreted as a savvy investment for Churchill Downs in its continuing focus on investing in gaming friendly states.
The transaction is expected to be completed sometime later this year pending Churchill Downs acquiring a gaming license in the state from the Maine Gaming Control Board. Should the company fail to secure a license or any customary closing conditions, Churchill Downs could be in the hook to pay for an $8 million termination fee.
CDI, though, is confident that the acquisition will go on smoothly. In a press release, Chairman and CEO Robert L. Evans expressed excitement over the company’s latest acquisition, saying that the Oxford Casino purchase continues the company’s focus on “investing capital in gaming-friendly states, in newer properties, in what we believe are competitively defensible markets, and at valuations that we believe will result in significant future free cash flow generation at rates of return attractive to our shareholders”.
“The Oxford team of over 400 employees has done an exceptional job and we look forward to welcoming them into the Churchill Downs family,” Evans added.
In the event Churchill Downs manages to accomplish all the prerequisite requirements, the company is expected to tap into its existing credit facility to pay for the casino. Similarly, the acquisition will be treated as an asset transaction instead of an equity transaction for tax purposes, providing tax benefits that could ultimately reduce the transaction price.
Bob Bahre, the founder of Black Bear Realty Co. LLC and the current owners of Oxford Casino explained the rationale behind cutting loose with a casino that still wasn’t a year old. Although we developed the property,” Bahre explains, “operating casinos is not our core business, and we thought that the time was right to look for a major gaming company that could take this property to the next level. We are confident that we have found such a group in Churchill Downs, and we look forward to welcoming them into the community.”