Churchill Downs Closes Rivers Casino Des Plaines Deal, Despite Fewer Female, Minority Investors

Casino and racetrack operator Churchill Downs Inc. finalized earlier this month the acquisition of a majority stake in Rivers Casino Des Plaines near Chicago, even though it seems it has failed to fulfill an important condition of the Illinois Gaming Board.

The state gaming regulator gave the green light to the transaction on March 1. Board members voted overwhelmingly in support of the $326 million deal that saw Churchill Downs acquire a nearly 62% stake in Rivers Casino’s owner Midwest Gaming Holdings.

However, the gaming regulator told Churchill Downs that it had 90 days to bring in more female and minority investors as an important condition for the company to be able to seal the transaction. The company purchasing a majority stake in the property’s owner resulted in female and minority ownership interests dropping from 17% prior the sale to under 3%. This was due to the fact that most of the female and minority investors agreed to sell their holding to Churchill Downs.

To close the deal, the company has agreed to sell up to 10% of Midwest Gaming to new female and minority investors within a 90-day period in “a good faith effort”.

The deal was closed on June 4. However, it seems that the female and minority investors condition has not been fulfilled.

Issue Could Be Taken Up by Gaming Board

News outlet the Chicago Daily Herald reported Thursday that a now former board member has urged the regulator to take up the issue again. During a June 13 meeting of the board, Chairman Donald Tracy urged his fellow regulators to continue reviewing the transaction, even though it was finalized earlier this month. Mr. Tracy said that the matter should be discussed again during the board’s next meeting on August 1.

The gaming official added that “I hope and expect the board to determine whether or nor the … Churchill Downs effort to sell up to 10% to statutory investors was a good-faith effort or not.” Mr. Tracy resigned from his Chairman post shortly after the board’s June 13 meeting.

Rivers Casino is Illinois’ largest and highest grossing casino. According to stats released by the Illinois Gaming Board, the property generated gaming revenue of $441 million last year. Of that, $170 million was contributed to the state, while local governments received $25 million.

Midwest Gaming assumed ownership of Rivers Casino Des Plaines in December 2008. It is believed it was granted a license by the state regulator because of its plan to bring in more female and minority investors.

Aside from Rivers Casino, Churchill Downs also owns Arlington International Racecourse in the greater Chicago area. The company is extending its footprint in Illinois at a time the state is gearing up for massive expansion of its gambling industry. The state Legislature approved recently a legislation providing for the construction of up to six casinos and the regulation of sports betting, among other things.

The gambling reform needs Gov. J.B. Pritzker’s signature to take effect as a law, and the state’s top official has indicated that he favors expansion of the local gaming and betting industry.

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