Churchill Downs Buying Maine Casino for $160 Million

Over the weekend, Churchill Downs -- owner of the famous Churchill Downs Racetrack in Kentucky, as well as racetrack and casino operations in Florida, Louisiana, Illinois, and Mississippi -- announced it's expanding with a $160 million acquisition of the Oxford Casino in Maine.

The transaction is dependent on the company securing a gaming license from the Maine Gaming Control Board, as well as other customary closing conditions. It is expected to close in the fourth quarter of 2013. If the deal falls through, the company could be on the hook for an $8 million termination fee.

According to Churchill, the newness of the Oxford property (it's only been open since June) means there's only "limited actual financial data" available. Nevertheless, Churchill did have a few financial tidbits to share. Based on the company's projections and the Oxford management team's budget:

  • The purchase of Oxford will probably be immediately accretive to the $3.34 per share that Churchill Downs earned last year.

  • It will add approximately $12.5 million to Churchill's annual free cash flow -- which totaled $103.1 million in 2012.

  • Perhaps most importantly, Churchill Downs says the $160 million it is paying for Oxford represents a 7.5-times multiple to Oxford's trailing earnings before interest, taxes, depreciation and amortization (EBITDA).

This last point suggests that Churchill Downs, whose own shares cost about 8.3 times EBITDA, is actually getting Oxford for quite a nice discount to the valuation of its own shares.

"The acquisition of Oxford continues our 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," CDI CEO Robert L. Evans is quoted as saying.

Oxford is on 100 acres about 40 minutes northwest of Portland in southern Maine. The property includes a 25,000-square-foot single-level gaming floor with 790 Class III slot machines and 22 table games. It also hosts a 140-seat casual restaurant.


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