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When Churchill Downs Inc. put its Hollywood Park racetrack on the auction block, more than a dozen companies jumped at the chance to buy the prime property. But after months of intense bidding, one company broke ahead of the pack. Bay Meadows Land Co. not only offered $260 million in cash for the L.A. racetrack, it also gave Churchill Downs the chance to become a majority owner of the track if Bay Meadows can get legislation passed in the next three years that would bolster the horseracing business. The industry has seen a decline in business because of competition from casinos and other gambling outlets. Bay Meadows wants California legislators to adopt a bill that would allow slot machines and other forms of gaming at racetracks. If the San Mateo company wins this lobbying effort, it will keep Hollywood Park intact rather than shut it down and redevelop the land. Churchill Downs would then be able to reinvest in the site. Daniel Kelly Jr., a partner at Davis Polk & Wardwell’s Menlo Park office who represented Bay Meadows, said such a repurchasing option is unusual. “When our client put that in the bid I said, ‘Are you kidding me?’” Kelly said. “But in the end, this feature distinguished the Bay Meadows bid from the others and won the deal for our client.” Kelly said the provision was complicated and very difficult to negotiate. Under the terms of the deal, Churchill Downs could get a majority stake in the racetrack for up to three years and a declining stake over the following five years. The repurchase option would be cut off if the land is redeveloped. Based in Louisville, Ky., Churchill Downs owns seven racetracks throughout the country and hosts the Kentucky Derby and other prestigious races. In a July 6 release announcing the deal, Bay Meadows said it would seek alternative uses for the current racetrack site “in the event that our best efforts are unable to improve the underlying economics of the horse racing industry and to stem the tide of horses leaving the state.” Hollywood Park is 11 miles southwest of downtown Los Angeles and three miles form Los Angeles International Airport. The 238-acre site also includes a casino. The racetrack was launched in 1938 under the chairmanship of movie mogul Jack Warner, of Warner Bros. The original shareholders included many stars, directors and producers, such as Al Jolson, Walt Disney, Bing Crosby and Sam Goldwyn. Bay Meadows also owns and operates Bay Meadows Racetrack in San Mateo. The company is itself owned by Stockbridge Real Estate Fund, a private partnership formed to invest in real estate. “We understood that most or all of the other bidders were developers,” Kelly said. Bay Meadows is also a racetrack owner and “understood how the economics would improve if gaming were permitted at the racetrack.” The Davis Polk team also included partners Yukako Kawata, Thomas Patrick Dore Jr. and William Weigel, counsel James McIntyre and Betty Moy and associates Kevin Smith, Ashira Ostrow, Sharon Crane, Renata Ferrari, Lori Fields and Frank Azzopardi. Gibson, Dunn & Crutcher represented Churchill Downs. Los Angeles partner Eric Remensperger led the Gibson team. — Brenda Sandburg HOW TO ENJOY INDEPENDENCE DAY To most people, $1.7 billion is a lot of money. But for Michael Halloran, the price tag on client Zions Bancorp’s planned acquisition of Amegy Bancorporation Inc. — announced July 6 — wasn’t even enough to be the merger of the week. “It’s not as big as Bank of America and MBNA,” said the Pillsbury Winthrop Shaw Pittman partner, referring to the big June 30 deal worth about $35 billion. Zions’ decision to expand into Texas by acquiring Amegy nonetheless provided some stressful nights and a work-packed month, culminating in three harried days over the July Fourth weekend, Halloran said. And while the bulk of the work was done in the days leading up to the deal, legal work on bank mergers tends to linger for months. “After the signing, you have to file applications with regulators, and it takes quite awhile to get them to approve,” he said. “It’s not like a regular public company merger, when you have all this regulation.” But Halloran added that he doesn’t mind the extra work inherent with bank acquisitions, which in recent times have tended to be rather straightforward affairs. “The banking industry today is in pretty good shape,” he said. “The banks that you’re acquiring tend to be profitable in and of themselves.” That was the case with Amegy, which is now bathed in controversy since it was reported last week that the bank turned down a competing offer that may have been worth more money. Along with Halloran, Pillsbury’s local lawyers included partners Rodney Peck, Patricia Young, Keith Gercken and Cindy Schlaefer, along with associate Harpreet Bal. Amegy was represented by lawyers in Sullivan & Cromwell’s New York office. — Justin Scheck

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