Churchill Downs Buys Casinos in Pennsylvania and Mississippi

Churchill Downs Lady Luck Casino - Churchill Downs Presque Isle

Churchill Downs bought social gaming company Big Fish Games for $900 million in 2014, then sold it earlier this year.

Churchill Downs Incorporated (CDI) bought land-based casinos in Pennsylvania and Mississippi this week, in an attempt to expand its US footprint. The total purchase price for the casinos is $229.5 million.

The Pennsylvania casino in the deal is Presque Isle Downs & Casino in Erie, Pennsylvania. Ownership of the casino allows Churchill Downs the right to bid on a satellite casino, after a new law passed in October 2017 allowed Pennsylvania casino operators to build one mini-casino apiece.

The Mississippi property is Lady Luck Casino in Vicksburg. The Lady Luck is owned by Eldorado Resorts, after the Reno-based casino company bought the property from Isle of Capri Casinos in 2017. Isle of Capri bought the casino from Bally Gaming in 2010, when the property was named Rainbow Casino.

Churchill Downs Incorporated CEO Bill Carstanjen said in a press release, “We are excited about welcoming both of these properties to the Churchill family. Presque Isle will give us a foothold in Pennsylvania which has recently passed legislation authorizing real money online gaming.”

“The Lady Luck Vicksburg is immediately adjacent to our Riverwalk facility and offers us operational efficiencies in a stable region. Both properties fit our investment criteria and will be immediately accretive to our shareholders.”

Consolidation of US Casino Market

The deal continues a trend of consolidation in the US casino market. In December 2017, Penn National Gaming bought Pinnacle Entertainment — a major competitor in Middle America — in a $2.8 billion deal. In November 2017, Caesars Entertainment bought Centaur Holdings’ Indiana casinos in a $1.7 billion deal.

In 2014, Churchill Downs bought Big Fish Games, a social gaming platform, for $900 million. Earlier in 2018, Churchill Downs sold Big Fish Games to Aristocrat Leisure for the same amount. That windfall gave the casino and racetrack operator the spending capital to make its purchases from Eldorado Resorts.

Churchill Downs Requires Licensing

Churchill Downs needs to obtain a casino license from the Pennsylvania Gaming Commission and Mississippi Gaming Commission, before it can take over operations of the casinos. In addition, Churchill Downs must obtain a horse racing license in Pennsylvania, because Presque Isle Downs is both a slots casino and a racetrack.

Obtaining gaming licenses should not be a problem for Churchill Downs, since it is one of the most recognized gaming brands in the United States. Churchill Downs is the site of the annual Kentucky Derby, which is the most prestigious thoroughbred horse race in the world each year.

Churchill Downs Louisville Casino

The purchases should be some consolation to Churchill Downs, which has tried unsuccessfully for the past year to convince the Kentucky State Legislature to legalize land-based casino gambling. Churchill Downs would like to open a casino in Louisville, but the attempt to convince Kentucky lawmakers to legalize casinos has been a forlorn hope so far.

Kentucky has a mounting pension crisis that is requiring its government to find inventive solutions. The state’s debt is mounting, so the legislature may eventually have to pass new taxes. Since the state is controlled by Republicans in the legislature and governor’s mansion, raising taxes is considered a non-starter. Churchill Downs and its legislative allies believed taxes on casino revenues would be a less direct way to generate state funds, but neither the governor nor the top lawmakers seem interested.

Presque Isle Downs & Casino

Presque Isle Downs was developed by MTR Gaming Group from 2005 to 2007. The grand opening of the racetrack-casino or racino was in 2007. The casino side of the business includes 1,600 slot machines, 32 table games, and a poker room.

In September 2014, MTR Gaming Group and Eldorado Holdco LLC merged, creating Eldorado Holdings. The merged entity is what sold Presque Isle Downs and Lady Luck Vicksburg to Churchill Downs.

The Reno-based company continues to own 18 casinos in 11 different states. Most of those casinos have the titles Isle of Capri, Lady Luck, or Eldorado. Circus Circus Reno, Eldorado Reno, and Silver Legacy Reno are its Nevada holdings.