CDI Plans to Sell Nine Casinos, Including Presque Isle

In a major reshaping of the company, Churchill Downs Inc. plans to sell nine wholly owned casinos as it plans to move forward by leaning into its horse racing and pari-mutuel properties that include the Kentucky Derby (G1), historical horse racing, and its advance-deposit wagering platform TwinSpires.com. The plan was announced and outlined July 30 in a conference call with analysts and investors following the July 29 release of the company's second quarter performance, which saw record-breaking net revenue of $980 million. Despite those strong numbers for the quarter, CDI stock opened Thursday at $85.45, down 27% year-to-date. The company plans to sell Calder Casino in South Florida, Terre Haute Casino in Indiana, Hard Rock Casino in Iowa, Oxford Casino in Maine, Ocean Downs in Maryland, Harlow's and Riverwalk casinos in Mississippi, del Lago Casino in New York, and the Presque Isle Downs track and casino in Pennsylvania. In announcing the plans, CDI CEO Bill Carstanjen said the company would retain its Fair Grounds Race Course & Slots properties in Louisiana because of its long-term importance to the racing industry, as well as to the Kentucky Derby. Fair Grounds hosts key Derby prep races such as the Louisiana Derby (G2). "Over the last number of years, we have built and acquired unique growth assets, invested organically with Kentucky Derby and high-return (historical horse racing) properties, and monetized assets where we believe another owner could create additional value. We believe that our recent share price performance has not reflected the quality, durability, and cash-generating characteristics of our properties, and we certainly recognize that we must constantly analyze and adapt to our market environment dynamic," Carstanjen said. "After a great deal of internal strategic analysis and discussion, we commenced the strategic review of our wholly owned regional gaming properties within our gaming segment. As part of this review, we assessed the strategic importance of each of our wholly owned regional gaming properties to our overall company strategy." Following that analysis, Carstanjen said CDI decided to sell the nine properties. He said those sales most likely would be made over the coming months individually or in small groups to maximize value for shareholders. CDI will lean into its highly successful HHR properties in Kentucky, Virginia, and New Hampshire. While that gaming form offers an experience similar to slot machines for players, payouts are based on a pari-mutuel formula and winning outcomes are based on previously run horse races. The operations have been highly successful for CDI. In Kentucky and Virginia, they also have helped boost Thoroughbred purses. "Our intention is to use any asset sale proceeds to significantly reduce our leverage, reinvest selectively in Churchill Downs racetrack and in other high-return projects, and fund the repurchase of shares of our stock," Carstanjen said. "Going forward, we will concentrate on assets with strong cash flow and durable competitive advantages. "Three cornerstones will anchor this strategy: the Kentucky Derby, our (HHR) businesses, and our TwinSpires business. Together, these cornerstones support the horse racing ecosystem and provide multiple avenues for profitable growth and long-term shareholder value." The company, which Wednesday announced a repurchase of a 49% share of United Tote from the New York Racing Association to give it 100% ownership of that property, will shift its focus to racing- and pari-mutuel- related properties. Carstanjen provided a vision of each of those pillars. "The Kentucky Derby is our defining asset and the foundation of our differentiating strategy," he said. "As the crown jewel in our portfolio, we are committed to expanding its relevance, reach, and earnings power while preserving the traditions that make it singularly unique. It is a luxury live sports and entertainment property that builds on 152 years of tradition, historic Americana, celebration, and shared experiences. We intend to build on that legacy. "Our goal is to make Derby Week an even broader national and international event. We see meaningful opportunities to grow global attendance, wagering, viewership, sponsorship, and (adjusted earnings) across a full week. Strategic investments will remain a key part of our long-term strategy for growing the Derby. These projects are designed to elevate the guest experience, expand premium inventory, deepen sponsorship opportunities, and generate attractive long-term returns." He said the company aims to pursue additional HHR endeavors in other states that approve the gaming, as well as international opportunities. CDI owns Exacta Systems, an HHR technology provider. "Our (HHR) venues play an important role in supporting the horse racing industry in their respective states. They generate purse funding, support the local agricultural industries, support local charities, create jobs, and drive meaningful economic impact in their communities," Carstanjen said. He then outlined the vision for TwinSpires, which handles pari-mutuel wagers on horse races throughout the United States and the world. "The third cornerstone is TwinSpires," Carstanjen said. "TwinSpires remains focused on expanding interest and participation in horse racing wagering through innovation and broader direct-to-consumer and business-to-business distribution. During Derby Week, TwinSpires again set records for wagering, new registrations, first-time depositors, and active players. We intend to build on that momentum."