Delaware business: Dover Downs, Dover Motorsports call off merger

Minority shareholders in NASCAR operator win out

By AARON NATHANS • The News Journal • October 15, 2010

Bowing to pressure from minority shareholders, Dover Downs and Dover Motorsports have called off their planned merger.

Henry Tippie, chairman of the board of both companies, said in a statement on Wednesday that it became apparent the proposed deal would not gain the approval it needed from minority shareholders.

"While we believe that combining the two companies would have benefited both organizations, we have agreed to a mutual termination of our merger agreement," he said.

Dover Downs operates a casino, hotel and horse racing operation. Dover Motorsports offers NASCAR racing.

Because one person -- Tippie -- controls voting rights for more than 50 percent of the stock of both companies, their legal counsel suggested that a majority of minority shareholders would be needed to complete the deal.

But minority shareholders on the NASCAR racing side said the deal undervalued the company. Some large minority shareholders like GAMCO Investors and Marathon Partners have argued that selling the company would reap a better return.

An analyst affiliated with GAMCO even said it might make sense to close Dover International Speedway and move the two annual NASCAR races to Las Vegas and Chicago.

The companies were one before they split eight years ago. Despite the separate corporations, they share many of the same executives and boards.

As part of the deal, Motorsports shareholders would have received just over half a share of Dover Downs Gaming stock for each of their own shares.

Both companies have struggled lately, with competition squeezing the gambling operations, and lower attendance dogging the racing company. Dover Motorsports has had disappointing results from the acquisitions of other racetracks, including one in St. Louis, which it will stop using for NASCAR in 2011.

Dover Motorsports also owns Nashville Superspeedway in Tennessee.

Mario Cibelli, managing member of Marathon, said he doesn't understand why the company floated the merger in the first place.

"If they just picked up the phone and called a few of their shareholders, they'd know this didn't have a good chance of getting approved," he said.

Cibelli has been critical of Tippie's leadership. He said the company should hire an adviser to consider a sale to International Speedway or Speedway Motorsports, two large NASCAR racing firms. He said it would make sense for a buyer to keep the two races in Dover.

Contact Aaron Nathans at 324-2786 or anathans@delawareonline.com.