Churchill Downs Inc.'s CEO said the company's plan to buy a majority share of Rivers Casino in Des Plaines for $500 million was born from a desire to expand into other avenues of gambling not currently permitted at nearby Arlington Park racecourse in Arlington Heights.
In a conference call Thursday with investment analysts, Bill Carstanjen called Rivers a premier regional casino with a "significant future upside."
Arlington Heights Mayor Tom Hayes said he first learned about the tentative acquisition in the Daily Herald. He said his first thought was this was an alternative plan to the company's long-running lobbying efforts in Springfield to get slot machines at the struggling racecourse.
"I look at it as a positive development for both the racetrack itself and the village if it keeps Arlington racetrack up and running in our community," Hayes said.
But Carstanjen hedged when asked by JP Morgan analyst Dan Politzer if the pending Rivers Casino deal indicates a shift in how Churchill Downs views its ownership of Arlington Park.
While saying "there's no change to Arlington Park at this time," he went on to detail the challenges to horse racing in the state. He said the acquisition will put the company in "an excellent competitive position in a casino gaming market we have always valued as we work with the Illinois legislature and executive branch to determine the future of our Arlington Park racetrack."
Churchill Downs has argued for years that its inability to get state permission for slots and other gambling options at Arlington Park hurts the racecourse's competitiveness.
"Certainly, that's a jurisdiction where we've watched our horse-racing business decline over time in Illinois despite the presence of an absolutely fantastic team and extremely supportive local community," Carstanjen said. "But the structure of Illinois racing has not been advantageous versus other states, and, because of that, Illinois racing in general has suffered."
The acquisition, if approved by regulators including the Illinois Gaming Board, will give the company control of the premier casino and racetrack in the state -- each far ahead of its competitors in revenue -- just as voters are about to choose an Illinois governor and Chicago mayor. And the new legislature will write the rules for sports betting in Illinois that is likely coming in the wake of a Supreme Court decision earlier this year.
Carstanjen said Churchill Downs must do what's in its shareholders' best interests.
"We'll continue to evaluate what's best for Arlington Park and what's best for Churchill Downs in the long term," Carstanjen said. "But certainly it was important for us to have a long-term presence in Illinois where we thought we have access to new products -- iGaming, sports betting, etc. -- that might become available over time. And certainly Arlington Park is not in those businesses.
"Arlington Park does not have slots or table games or any kind of clear access to additional products," Carstanjen continued. "And it was important for us to make sure that we could continue to participate in the Illinois market over time."
Carstanjen said the location and population dynamics of Rivers Casino are among the reasons Churchill Downs values it so highly. The casino is adjacent to the nation's second-busiest airport and in the middle of the country's third-largest metropolis.
"And we think there are elements that will protect this property if there ever is an expansion of gaming," he said.
Churchill Downs acquired Arlington Park in 2000 in a deal with owner Richard Duchossois, who remains chairman of the track. Rivers Casino opened in 2011, with billionaire real estate investor Neil Bluhm as lead partner.
Churchill Downs recently opened sports books in Mississippi at the Riverwalk Casino and Hotel in Vicksburg and Harlow's Casino Resort and Spa in Greenville.
Carstanjen said sports betting technology being tested in the smaller Mississippi markets will help the company in larger ventures such as Rivers.
He added that sports betting is a desirable business and that the Mississippi ventures were immediately profitable.