Churchill Downs, Inc. (CDI) is going to own one Pennsylvania casino and operate another before it’s all said and done.
Earlier this year, CDI agreed to purchase both Presque Isle Downs near Erie and Lady Luck Vicksburg in Mississippi. The horse racing outfit based in Kentucky is expanding its casino portfolio, seeking to establish a position in the budding sports betting industry.
The group had PA and MS in its sights, two states among the small group that recently legalized the activity. The Lady Luck Vicksburg deal fell through, but prospective seller Eldorado Resorts has come up with an amended offer.
Churchill Downs + Lady Luck Nemacolin
Eldorado CEO Gary Carano said the transition aligns with the group’s long-term strategy in the region.
We are delighted to work with the team at Churchill Downs to move forward with our planned divestiture of Presque Isle Downs and believe the transfer of the management of Lady Luck Nemacolin to Churchill will allow Eldorado Resorts to realize meaningful tax benefits.
Churchill Downs will make a one-time cash payment of $100,000 to assume operations of the small property in southwest PA. When the deal goes through, it will have casino interests in seven states across the eastern US.
Eldorado has been scooping up casinos itself, including a recent acquisition of the Tropicana Entertainment portfolio. It will retain ownership of Lady Luck Nemacolin while leasing out operations to CDI.
The Presque Isle transaction is subject to customary closing conditions, including approval from PA regulators, and the Lady Luck agreement is contingent upon completion.
Executives are hopeful the deals will close by Q4 this year.
What happened to Mississippi?
The Vicksburg deal dissolved amid anti-trust concerns from the Federal Trade Commission.
Churchill Downs first announced plans to acquire the two properties back in February, citing a total consideration of $229.5 million. The group already owns the Riverwalk Casino Hotel in Vicksburg, which happens to be directly adjacent to Lady Luck. The two properties are so close to each other that their parking lots are connected.
That, apparently, raised some red flags in Washington D.C.
On May 7, the FTC requested additional documents and information specifically related to Lady Luck Vicksburg and pursuant to the federal anti-trust act.
After exploring what would be involved in meeting the FTC request, the parties decided to forgo the $50.6 million Vicksburg transaction entirely. Churchill Downs paid Eldorado a $5 million penalty for terminating the agreement.
The $178.9 million Presque Isle deal is moving forward as agreed.
More on Lady Luck Nemacolin
Lady Luck Nemacolin is both the smallest PA casino and completely unique in the market.
Located south of Pittsburgh, the gaming facility serves as an amenity to a much larger property. The Nemacolin Woodlands Resort is a 2,000-acre complex boasting two premier golf courses, a private airport, and five-diamond food and lodging. Also a zoo.
Although the casino is private, the barrier to entry is low. Hotel guests can play for free, and visitors can purchase an annual membership for $45.
Lady Luck Nemacaolin has 600 slot machines and 27 gaming tables, which generated about $34 million in revenue last year. That’s barely one percent of the total PA casino market.
Churchill Downs did not respond to a request for comment, so its plans aren’t fully apparent. As for the building itself, the status quo seems likely. The property’s real value is its casino license, which the new operators will presumably leverage into online gambling platforms targeting the southern part of the state.
CDI currently offers online horse betting via TwinSpires, and it recently partnered with industry leader SBTech to provide its sports betting infrastructure.
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