Churchill Downs Buying $123.75M of Own Shares from Duchossois Group

Posted on: December 18, 2023, 05:43h. 

Last updated on: December 19, 2023, 11:07h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Churchill Downs (NASDAQ: CHDN) announced Monday that it will buy back one million of its shares for $123.75 apiece from an affiliate of the Duchossois Group.

Churchill Downs Kentucky Derby horse deaths
Horses break from the outside during the 148th Kentucky Derby on May 7, 2022. Churchill Downs stock is buying back one million of its shares in a private transaction. (Image: Eclipse Sportswire)

That values the transaction at $123.75 million, and the per-share price represents a discount from Monday’s closing price of $129.97. The gaming company’s board of directors approved the privately negotiated deal.

The aggregate purchase price is $123.75 million. CDI will repurchase the shares using available cash and borrowings under its senior secured credit facility. The transaction is expected to close on January 2, 2024,” according to a statement issued by Kentucky-based Churchill Downs.

The transaction with the Duchossois Group isn’t related to the gaming company’s previously announced share buyback plans.

Churchill Downs May See Value in Stock

As is the case with a traditional share repurchase program, Churchill Downs’ agreement with the Duchossois Group could signal to investors the operator sees value in its shares.

The company has a penchant for shareholder-friendly moves. In April, it announced a split of its stock on a 2-for-1 basis. In addition to the share split, the company announced a $500 million repurchase program in September 2021, and its annual dividend has grown by more than 40% since 2010.

At the end of trading on Monday, the company behind the Kentucky Derby had 74.80 million shares outstanding and a market capitalization of $9.69 billion. The stock is up 22.94% year-to-date. It’s not clear for how long Duchossois Group has been an investor in the regional casino operator.

“The Duchossois Group, Inc. is privately held and comprised of operating companies and an investment company. Our operating businesses consist of leading brands in access control for commercial and residential markets,” according to the firm’s LinkedIn profile. “The Duchossois Family’s private investment firm, Duchossois Capital Management, creates long-term value by applying the extensive industry knowledge, operational expertise, and permanent capital base developed over ten decades as a family business to a variety of investment opportunities.”

Churchill Downs Beloved on Wall Street

While Churchill Downs has no Las Vegas Strip exposure, and there are lingering concerns about the state of the U.S. horse racing industry, the stock is a gaming favorite on Wall Street. Catalysts include an extensive pipeline of high return on investment projects, benefits from the Exacta and P2E acquisitions, and the emerging growth story tied to historical horse racing (HHR) machines.

Of the nine analysts covering the company, seven rate it the equivalent of a “strong buy,” and the other two rate it “buy.” The average 12-month price target on the stock is $142.56, implying an upside of 9.69% from Monday’s close.

Over the past three years, no analyst has issued a “sell” rating on Churchill Downs.