Whither Dover?
by Anthony Noto
Updated 04:49 PM, Nov-06-2009 ET

More information about the pending auction of Dover Motorsports Inc., including a likely asking price, will be revealed Monday, Nov. 9.

By Monday evening the company will receive results of a shareholder survey accumulated over the past two weeks that sought to establish a potential price tag.
  
The survey was conducted through Shareholder Forum and sent to thousands of recipients, according to Forum manager Gary Lutin.
  
Its findings will be posted on the Shareholderforum.com Web site.
  
For about a year, the Dover, Del., racetrack operator has been fending off dissident shareholders pushing for an auction. The shareholders appear to be led by a group of hedge fund firms that believe a sale is the company's best hope for survival.
  
It is expected to yield a percentage scale for investors who would be satisfied with a pre-determined range of prices.
  
Marathon Partners LP managing partner Mario Cibelli, one of the more vocal dissident shareholders, said he believes Dover could easily go for $4 or $6 per share. The company's shares were trading around $1.60 on Friday afternoon, with its market cap near $61 million.
  
"We haven't talked to a single shareholder who's happy about what this management team has done," said Cibelli. "I know that sounds a little bit unreasonable given where it's trading, but great assets compensate for its small market cap."
  
For more than two years, Cibelli has made no secret of his discontent with DMS management — accusing it of entrenchment, poor communication with shareholders and of mishandling the sale of Memphis Motorsports Park, a struggling racetrack in Memphis.
  
Mario Gabelli, of Gamco Investors Inc., which controls 9% of the company's shares, has lobbied for a sale of Dover in the past. Gabelli could not immediately be reached for comment.
  
J.T. Thomas, whose Bedrock Investment Management fund owns roughly 1% of DMS' stock, said this summer that he believes the company "hasn't pushed for a sale nearly as much as it should have."
  
A Sept. 9 letter from a DMS senior executive to Cibelli said the company has attempted to negotiate a sale, to an alliance formed by Daytona Beach, Fla.-based International Speedway Corp. and Concord, N.C.-based Speedway Motorsports Inc.
 
In the letter, DMS senior vice president Klaus Belohoubek describes a meeting that took place in May 2007 at an airplane hangar between himself, other DMS executives, Lesa Kennedy, International Speedway president, and Burton Smith, Speedway CEO.
  
"You know that there are only two buyers for your company and that they're both sitting at this table. You have to do something. And you don't have a choice but to sell to us," Smith was quoted as saying.
  
Belohoubek said the discussions lasted about one hour before Smith offered to buy DMS at market value with no premium, and an additional nickel per share.
  
"Why he chose to be so insulting is anyone's guess, but the meeting adjourned shortly after this," Belohoubek said in the letter.
  
"We will continue to evaluate any acquisition offers that may be made from time to time, but you will not hear about any of them from us until we are in a position to make an announcement to all our stockholders, not just the loudest and most obnoxious ones," it adds.
  
However, Cibelli believes that if DMS management waits too long, it will get much less than it deserves.

©Copyright 2009, The Deal, LLC.