Big bet isn't paying off
By ASSOCIATED PRESS
Published May 23, 2007
TORONTO - Frank Stronach, the Canadian millionaire who owns the track where the 132nd Preakness was run on Saturday, likes to tout his auto parts company's conservative financial principals. Cash on Magna International's books exceeds long-term debt by almost $1.4-billion, for example.
But when it comes to the horse racing and entertainment company he controls, the picture could not be more different. Magna Entertainment's debt has piled up as operating losses soared and its finances are in such bad shape that its auditors question whether it can stay in operation.
In both cases, Stronach has almost dictator-like control of the public companies because of the blocks of super-voting shares he holds in each. A review of their filings with the Securities and Exchange Commission shows he has not been bashful about transferring assets among his various companies to keep his bet on the future of horse racing alive.
He controls Preakness' home, Pimlico Race Course in Baltimore, and Gulfstream Park, north of Miami. Another one of his top tracks is Santa Anita Park in Arcadia, Calif., and he runs the Palm Meadows Training Center in Boynton Beach, which has stabling for about 800 horses.
Now he wants to add to his 10 tracks in the United States by joining with other bidders to win control of Belmont Park, home of the third leg of the Triple Crown, as well as the Aqueduct and Saratoga tracks in New York.
Stronach, 74, arrived in Canada from war-torn Austria in 1954 with about $40 in his pocket. He started a tool-and-die business three years later and through a series of acquisitions his Aurora, Ontario-based Magna International has grown to $24-billion in sales last year in 23 countries and a market capitalization of $8.9-billion.
Stronach referred to himself as a "king" at one shareholder meeting and was compared to Fidel Castro at another during a shareholder revolt.
"He has a board of directors, but they're there for his pleasure, " said Wayne Lilley, author of Magna Cum Laude, an unauthorized biography of Stronach. "They are just window dressing. He does what he wants."
The road to building what the company describes as North America's No. 1 owner and operator of horse racetracks has been a bumpy one. Magna Entertainment reported net losses of $87.4-million in 2006, $105.3-million in 2005 and $95.6-million in 2004, and has an accumulated deficit of $393.8-million, as of March 31, SEC filings show.
"Accordingly, the company's ability to continue as a going concern is in substantial doubt and is dependent on the company generating cash flows that are adequate to sustain the operations of the business, renew or extend current financing arrangements and maintain its obligations with respect to secured and unsecured creditors, none of which is assured, " the company said in the filing.