Dissident shareholder wants Gateway track's parent sold

BY DAVID NICKLAUS • dnicklaus@post-dispatch.com > 314-340-8213 | Thursday, November 4, 2010 11:21 am

While St. Louis racing fans mourn the closing of Gateway International Raceway, shareholders are engaged in a vigorous discussion about the future of the track's parent company.

Dover Motorsports got a letter this week from one shareholder, East Coast Asset Management, demanding that Dover put itself up for sale. The Essex, Mass., investment firm calls Dover the "odd man out" in the motorsports industry and accused it of destroying between $150 million and $325 million of shareholder value. A fair amount of that loss came in the 1998 deal to buy Gateway and other assets from racing entrepreneur Christopher Pook. It has since written off nearly all of the $91.2 million purchase price, East Coast alleges:

After a decade of operating losses and sunk capital expenditures, Dover has failed to derive any value from all of these assets. Thus, the board has proven its inability to execute intelligent acquisitions or to successfully integrate new assets.

East Coast's main point is that Dover's main assets, Dover International Speedway and Nashville Superspeedway, would be more valuable to a bigger competitor like Speedway Motorsports or International Speedway Corp. The investment firm also alleges, though, that Gateway is an undervalued asset:

First, Dover currently lists ists Gateway property at $1.5 million and its Memphis property at $2.8 million. Those numbers are understated considering Memphis was nearly acquired for $10 million in 2009. Furthermore, the Gateway facility that opened in May 1997, constitutes approximately 416 acres of land just five mmiles from the St. Louis Archway and offers a capacity of 70,000 seats along with a national caliber drag strip capable of seating an additional 30,000 people ... Thus, as both venues sit on attractive land close to expanding metropolises they could easily be acquired and operated profitably by Dover's competitors or be used as outdoor event venues by others in the leisure industry.

Yes, the letter really says "St. Louis Archway." East Coast also seems to be overstating Gateway's expanse -- the Post-Dispatch lists it as 150 acres and notes that Dover doesn't control the entire site.

East Coast's letter doesn't say how many Dover shares it owns. Dover got a similar letter two weeks ago from Marathon Partners, holder of 18% of Dover's shares, which asked for

a true open and robust exploration of all available strategic alternatives to maximize stockholder value, including an open and full auction process.