Churchill Downs buys Presque Isle casino, eyes Pennsylvania online gambling opportunity


churchill-downs-presque-isle-casinoCasino and race betting operator Churchill Downs Inc. (CDI) has expanded its land-based operations by acquiring two properties in Pennsylvania and Mississippi.

On Wednesday, CDI announced that it had struck deals to acquire the Presque Isle Downs & Casino in Erie, Pennsylvania and the Lady Luck Casino Vicksburg in Mississippi, both of which are owned by Reno-based Eldorado Resorts. CDI will pay $229.5m in cash to acquire the two properties, with $179m allocated for the Presque Isle deal.

Presque Isle offers both racing and casino options, the latter including 1,600 slots, 32 gaming tables and a poker room. Lady Luck features 620 slots, nine tables and an 89-room hotel. The Presque Isle deal is expected to close in Q2 2018, with the Lady Luck transaction expected to follow sometime in Q4.

CDI CEO Bill Carstanjen noted that establishing a foothold in Pennsylvania will allow CDI the opportunity to participate in the state’s newly authorized intrastate online gambling market. CDI already operates online race betting through its TwinSpires advance deposit wagering site and has long expressed an interest in becoming “a significant player” in the non-racing online sector.

Wednesday also saw CDI release its Q4 and FY17 earnings report, which, as other gaming companies have reported, got a significant boost from the recently revamped US tax code. In CDI’s case, Trump’s giveaways added $57.7m to the company’s Q4 net income. The numbers were further complicated by CDI’s sale in November of its Big Fish Games social gaming division.

Accordingly, CDI’s official Q4 net revenue was up 10.6% to $179m, while net income shot up 42.5% to $38.2m. For the year as a whole, revenue improved 7.3% to $882.6m and profits gained 30% to $140.5m.

The ‘adjusted’ numbers show Q4 earnings rising 6.5% to $60.2m and net income up 89% to $5.1m. For the year, adjusted earnings rose 9.5% to $366.5m and net income gained 15.7% to $94.1m. Excluding Big Fish Games’ contribution, adjusted earnings rose 23.2% to $37.6m in Q4, while the full year figure gained 13.4% to $286.2m.

On an operational segment basis, CDI’s casino revenue was up 10.5% to $87.2m in Q4 and up 5.3% to $350.5m for the year thanks to solid increases at its Calder, Oxford and Riverwalk properties, as well as its share of the partnership that controls the Ocean Downs casino in Maryland.

Live racing revenue suffered a slight Q4 decline due to one less racing day on the calendar but finished the full year up 3% to $276.6m. TwinSpires’ ADW revenue gained nearly 18% to $57.5m in Q4 and rose 15% to $256.7m on the year.

The Big Fish Games segment saw its Q4 earnings fall $3.4m to $22.6m due to rising user acquisition costs.

In other CDI news, the Louisville Courier Journal reported last month that the company was the victim of an extortion plot by a former employee who took reams of customer data with him when he was fired in 2016. Ethan Fey reportedly tried to convince his former employer to give him 50 Bitcoin for the safe return of the data, but instead Fey found himself on the receiving end of a 15-month prison sentence last month.