By David Strow
LAS VEGAS SUN
MGM Grand Inc. Chairman J. Terrence Lanni and Mandalay Resort Group President Glenn Schaeffer are participating
in a Canadian automotive company's efforts to create one of North America's largest operators of horse racetracks.
Magna International Inc., one of the world's largest suppliers of automotive equipment, announced Monday it would
spin off MI Entertainment Inc. to handle the racetrack business it built up over the last two years. Magna is based
in the Canadian province of Ontario.
Lanni and Schaeffer were named as directors of the new company, to be based near Los Angeles. Magna also announced
that David Mitchell, the recently departed senior vice president of Caesars World Inc., will be chief financial
officer of the new concern.
"Like many industries, you're seeing a lot of consolidation," said Lanni, who stepped down as MGM's chief
executive Dec. 30. "The racing industry is going through the same thing. This company will be one of the two
dominant players in the horse-racing industry."
Lanni said he is not currently a Magna shareholder, but that he intends to acquire shares on the open market once
the spin-off is complete. He will also probably receive shares as part of a compensation package, though he said
it hasn't been determined what his compensation will be yet.
Schaeffer couldn't be reached for comment.
MI Entertainment owns and operate five tracks, including Santa Anita Park near Los Angeles, Gulfstream Park near
Miami and Golden Gate Fields near San Francisco. Magna currently offers races at these tracks on a "simulcast"
basis, allowing off-track wagering at casinos and racetracks across the country.
Lanni came to the company through Santa Anita, where he sat on the board of directors. That racetrack was acquired
by Magna in 1998, and Lanni remained on the board at the request of Magna Chairman Frank Stronach. Lanni owns a
number of racing thoroughbreds, and Stronach owns North America's largest stable of championship race horses.
The spinoff's business recorded pro forma net income of $7.6 million over the first nine months of 1999 on revenues
of nearly $140 million. Magna created the company as a separate operating unit in March, investing $550 million
in the effort. But the company has drained resources from Magna's core automotive business, prompting the spin-off.
The company is interested in developing its racetracks into entertainment destinations, encompassing movie theaters,
restaurants, hotels and retail shops. That's where the expertise of Lanni and Schaeffer will come in, said a Magna
official.
"Principally what they bring is the entertainment aspect," said Graham Orr, executive vice president
of Magna. "Twenty years ago, Vegas was very different than it is today because of entertainment. We're trying
to adopt that same philosophy in a different way."
The next step for the new company is the creation of an off-track, subscriber-based betting network encompassing
telephones, interactive television and the Internet. This network will have exclusive rights to broadcast races
from Santa Anita, Gulfstream and Golden Gate in three years.
Through such a network, a subscriber could use a set-top box to place live wagers from home on wagers being broadcast
from around the country. MI Entertainment intends to broadcast the content through a variety of media, including
satellite television, cable television and the Internet. Expansion into wagering on other sports could follow,
the company said in a Securities and Exchange Commission filing.
"The vision is basically to take a product and bring it to a higher level of performance, and how to bring
this into different venues," Lanni said. "A lot of how successful this opportunity will be will be determined
by city, county, state and federal authorities."
(c) Copyright Las Vegas Sun. All rights reserved. Visit the Las Vegas Sun online at http://www.lasvegassun.com