Business of Speed
The Money Behind the Motorsports Industry
By: Tim Frost
Date: November 1, 2018
This month, we will look at the current situation between Nascar and International Speedway Corporation from a financial perspective.
Nascar Holdings, Inc. recently made an unsolicited offer to purchase International Speedway Corporation. The potential transaction may have a huge impact on the sport going forward.
The history of Nascar began in 1948 when Bill France, Sr. gathered racers and promoters at the Streamline Hotel in Daytona Beach, FL. The result was to establish an organization that would a formalize rules, schedules and championship.
Over the next 70 years, Nascar had grown into an international sports and entertainment company with major offices in Daytona Beach and Charlotte. Collectively, Nascar sanctions over 1,500 races at 100 tracks in 48 states.
The three national series – Monster Energy Cup, Xfinity Series and Camping World are the most well known, along with several regional series and others in Canada, Mexico and Europe.
The corporate structure of Nascar has varied thru the years with a realignment occurring about ten years ago.
The prime entity is Nascar Holdings, Inc. with several entities below that including: Nascar Event Services, Nascar Media Group, and Nascar Digital Entertainment.
The current directors of Nascar Holdings, Inc. includes: Jim France, Lesa Kennedy, Garrett Crotty, Jennifer Bates and Ben Kennedy.
International Speedway Corporation was founded in 1953 by Bill France, Sr. for the construction of Daytona International Speedway. Built to replace racing on the beach, the track was built on land near the Daytona International Airport.
The 447-acre site was leased under agreement from the Daytona Beach Speedway Authority. The initial 50-year lease was for $10,000 per year. It was extended until 2054 with payments starting out at $500,000 per year.
To finance construction of the track, Bill France, Sr. borrowed money from several sources. In addition, he issued 300,000 shares of stock in International Speedway Corporation. These shares were privately held by various individuals and not available on the public market for sale or purchase. Smaller private transactions did occur based on prices quoted on the “pink sheets”
International Speedway Corporation went public in October 1996. They offered 4,000,000 shares at $18.00 per share raising a total of $72.0 million.
After the offering, there were two types of common stock – Class A and Class B. Class A holders had one-fifth of a vote while Class B held one full vote. The France Family Group held approximately 60.0% of the combined voting power of the Company’s common stock.
In 1996, International Speedway Corporation owned 3 tracks (Daytona, Talladega, Darlington) and minority interests in Watkins Glen and Penske Motorsports; It has revenues of approximately $96.0 mlllion. The market cap was $630.0 million.
This year, the Company will operate 13 tracks and ownership interests in Americrown Food Service, Motor Racing Network, Hollywood Casino – Kansas City and the One Daytona real estate development. In 2018, it will have estimated revenues of revenues of approximately $675.0 million.
The details behind the Nascar and International Speedway Corporation deal are complicated and contain specific conditions in order for it to occur.
The France Family would like to take International Speedway Corporation private and merge with Nascar.
The France Family Group proposed to acquire the outstanding shares of International Speedway Corporation they do not already own. This is approximately 24%. The offering price was $42.00 per share. This was a premium over the average 30-day prior trading price of $36.91.
The market cap of International Speedway Corporation was approximately $1.76 billion. At $42.00 per share, the deal value would be $1.9 billion. Since the deal was announced the stock price has traded above the offering price.
The Company has established a Special Committee of Independent Director’s to evaluate the deal. They will consult with their legal and financial advisors on how to proceed to the offer.
Nascar has retained Goldman Sachs as their investment banker and Baker & Botts as legal consul. The France Family is working with BDT and Company.
For this deal to proceed, there would be several steps. International Speedway Corporation would recommend the transaction, issue a proxy vote and tabulate the votes. The France Family Group would have to raise capital to buy out the minority interest shareholders. The publically traded shares would be delisted from the exchange.
The deal would need to be submitted to various governmental authorities for regulatory approvals. (Prior litigation from the Ferko and Kentucky Speedway matters might be notable.)
The potential of a combined Nascar / International Speedway Corporation entity could provide a solid foundation for the industry to move ahead during this rapidly evolving landscape for sports and entertainment properties.