Please ensure Javascript is enabled for purposes of website accessibility

Churchill Downs Buying Maine Casino for $160 Million

By Rich Smith - Apr 1, 2013 at 2:56PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Oxford Casino includes 25,000-square-foot gaming floor with 790 slot machines and 22 table games.

Over the weekend, Churchill Downs (CHDN 1.56%) -- 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.

link

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Churchill Downs Incorporated Stock Quote
Churchill Downs Incorporated
CHDN
$195.88 (1.56%) $3.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
338%
 
S&P 500 Returns
119%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/17/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.