When a takeover battle was launched last fall for control of the company that owns Santa Anita racetrack, about the last thing anyone expected was that the two rival bidders would be teaming up.
But last week, the two combatants Colony Capital’s Tom Barrack and the Koll real estate group’s Don Koll agreed to join forces by sweetening their bid for control of the publicly traded companies that trade in tandem on the NYSE Santa Anita Realty Enterprises and Santa Anita Operating Co.
The complex proposal would recapitalize the companies, distributing $230 million to Santa Anita shareholders while leaving the bidders with a collective 70 percent stake and a majority of seats on the board of directors.
As Santa Anita management reviewed the dual proposal last week, the companies’ stock price which had already doubled since Colony launched its initial bid last summer remained relatively stable at around $28 per share.
The joint proposal from Colony Capital and Koll Arcadia Investors would give Santa Anita shareholders “up to” $27 a share in cash, according to a statement from the bidders.
Koll/Colony spokesman Owen Blicksilver said the two groups, which have “complementary skills,” decided they could improve Santa Anita’s long-term prospects and the immediate return to shareholders by “working together rather than competing.”
Colony, headed by renowned real estate investor Barrack, is a Century City-based company that manages billions of dollars of real estate assets on behalf of major investors.
Koll Arcadia, which launched a rival bid last October after some shareholders complained that Colony’s initial offer was too low, brings together principals of Newport Beach-based Koll and New York’s Apollo Real Estate Advisors, headed by former Drexel Burnham Lambert dealmaker Leon Black.
The Koll Arcadia group’s most recent bid in January likewise offered current shareholders about $27 per share for a controlling stake, but included $25 million less in new equity capital ($116.5 million vs. $91.5 million) than last week’s dual bid.
What’s driving the battle for Santa Anita?
The answer is as complex as the offer itself and covers subjects as wide-ranging as Southern California real estate, a declining horse-racing industry and high-finance tax regulations.
What the latest Koll/Colony offer means for the landmark thoroughbred racing venue isn’t absolutely clear yet.
As track attendance has declined in recent years due in part to the emergence of off-track betting thoroughbred racing industry officials have discussed the possibility of consolidating into a single venue the events now held at Santa Anita and Hollywood Park in Inglewood.
Principals of Koll Arcadia had previously acknowledged that shutting down Santa Anita racetrack was one possible long-term option they would consider, while Colony COO Kelvin Davis had stressed that Colony is “committed to maintaining and enhancing live racing at Santa Anita as one of our primary objectives.”
Blicksilver acknowledged that if Koll/Colony is successful in taking over Santa Anita, the bidders would study the “consolidation” option in more detail with an eye toward “enhancing thoroughbred racing in Los Angeles.”
Some thoroughbred racing industry experts have speculated that it would make sense to close Santa Anita and put its racing dates at Hollywood Park.
Blicksilver, stressing that no such decisions have been made, acknowledged that the bidders would consider “strengthening horse racing by unifying (the tracks’ operations) or through other marketing efficiencies.” He declined to elaborate further.
In real estate terms, the Santa Anita grounds along the Foothill (210) Freeway which include the Santa Anita Fashion Park regional mall (the company has a 50 percent stake in the mall) and a medical office building are considered a prime long-term real estate development opportunity.