NEW YORK, Oct. 8 /PRNewswire/ -- Marathon Partners L.P.
("Marathon Partners") today announced that it delivered a letter to
the Board of Directors of Dover Motorsports, Inc. (the "Company")
(NYSE: DVD) expressing its serious and significant concerns with
the proposed merger of the Company with Dover Downs Gaming &
Entertainment, Inc. ("Dover Gaming"). In the letter, Marathon
Partners questioned the adequacy of the merger consideration to be
received by shareholders of the Company and the flawed process
tainted by conflicts of interest that was conducted by the Company
to arrive at such an inadequate valuation and value destroying
transaction.
Marathon Partners called on the Board to immediately terminate
the merger with Dover Gaming and conduct an open and robust
exploration of all strategic alternatives available to the Company.
Mario D. Cibelli, managing
member, stated, "It is clear that this proposed merger is not the
result of a sound process conducted by a disinterested Board and
team of advisors aimed at delivering immediate liquidity and full
and fair value for all of the Company's shareholders.
Instead, it appears that this ill-advised transaction is
nothing more than a mechanism for Chairman Henry Tippie to prolong his value-destroying
dominion over the Company. If this Board had any interest in
protecting the best interests of all shareholders, it would
immediately terminate the proposed merger and conduct an open and
robust exploration of all available strategic alternatives,
including an open auction process, to achieve maximum value.
We believe such a process could result in acquisition offers
from certain logical buyers, including International Speedway
Corporation and Speedway Motorsports, that, if consummated, could
yield significantly more value than the merger."
Mr. Cibelli continued, "Given the inherent conflicts of interest
that cast doubt on this transaction, including Mr. Tippie serving
as Chairman of both companies and that both companies engaged the
same financial and legal advisors, we cannot help but wonder what
type of flawed process the Company conducted to arrive at such an
inadequate valuation and ill-conceived transaction. To that
end, Marathon Partners will be submitting a demand to review and
inspect certain Books and Records of the Company pursuant to
Delaware law relating to the
proposed merger so that we may better understand the nature of the
process that led to the signing of the merger and so we can
investigate the possible breach of fiduciary duties by the
Board."
The full text of the letter follows:
Dear Members of the Board of Dover Motorsports, Inc.:
As the largest outside shareholder of the Company, we are
writing to you to express our serious and significant concerns with
the proposed merger of Dover Motorsports, Inc. (the "Company") with
Dover Downs Gaming & Entertainment, Inc. ("Dover Gaming")
announced on September 27, 2010 (the
"Proposed Merger"). Based on our review of the Merger
Agreement, we believe the proposed consideration to be received by
shareholders of the Company is grossly inadequate and significantly
undervalues the Company. We are strongly opposed to the
Proposed Merger and believe the Company should instead immediately
engage in a fair and robust exploration of all strategic
alternatives available to the Company, including conducting an open
auction process, in order to maximize value for shareholders.
Given the steep discount to fair value the Proposed Merger
places on the Company, we cannot help but wonder what type of
flawed process the Company conducted to arrive at such an
inadequate valuation and value destroying transaction. We see
no evidence that the Board of Directors formed a truly independent
special committee to fully and fairly review strategic alternatives
available to the Company or that the Board took any steps to ensure
the best interests of all of the Company's shareholders were
protected and value was maximized. In fact, the Board
employed the same financial and legal advisors used by Dover Gaming
to counsel the Company with respect to the Proposed Merger.
Is it any wonder that shareholders are set to receive such
inadequate value for their investment? We are evaluating
such potential conflicts of interest and are currently evaluating
any and all legal options to ensure that the Company does not seek
to consummate this value-destroying transaction when better
alternatives for shareholders to realize full and fair value for
their shares exist.
Up until now, we believe the current Board has shown a complete
disregard for the best interests of all shareholders and its
fiduciary duty to maximize shareholder value. We are currently
evaluating all legal options and reserve our rights to take any
action necessary to ensure that the Company is once and for all run
in a manner that is consistent with the best interests of all
shareholders.
We also have serious questions about the wisdom of the Proposed
Merger from a strategic standpoint. As you are aware the
combined company would maintain the same management team, led by
Chairman Henry Tippie. Over
the past 8 years, Mr. Tippie and his management team have driven
the Company's shareholders' equity from more than $156 million to approximately $56 million. Shareholders have suffered a
staggering 68% decline in share price over the same period.
Given his disastrous tenure as Chairman of the Company, we
fail to see how simply merging the Company and Dover Gaming while
Mr. Tippie and his management team remain at the helm provides any
value to shareholders of the Company.
Further, we see significant uncertainty regarding Dover Gaming's
business. With Maryland casinos coming online and additional
casinos in Delaware being
considered, in addition to potential increases in Delaware's take of casino winnings, we see
Dover Gaming's profitability coming under increasing pressure in
the future. Yet the Board seeks to transfer this risk to the
Company's shareholders through the Proposed Merger without any type
of premium. We wonder why the Board is seeking to
unnecessarily burden shareholders with risks that are outside the
purview of the Company's operations for minimal consideration.
We believe it is imperative that the Board demonstrate to
shareholders that it is committed to maximizing value. Based
upon the feedback we have received to date from other shareholders,
it should be clear to the Board that a majority of the minority of
the Company's shareholders will not support the Proposed Merger.
To this end and to avoid continuing to incur unnecessary
expenses, the Board should terminate the Proposed Merger and
conduct an open and robust exploration of all available strategic
alternatives, including an open auction process, to achieve maximum
value for shareholders. We believe there are parties
interested in acquiring the Company for significantly more value
than shareholders stand to receive through the Proposed Merger.
These parties should be able to participate in, and
shareholders should be able to benefit from, a fair and open sale
or merger process.
We believe that the Board has an opportunity to reverse the long
steep decline in shareholder value. By conducting an open and
robust exploration of all available strategic alternatives,
including an open auction process, the Board can demonstrate to
shareholders that the Company is not being run simply for the
benefit of Mr. Tippie and management. Unless and until the
Board can do so, we remain vehemently opposed to the Proposed
Merger and will vigorously campaign against its approval.
Rest assured we will do all that we can to ensure that
shareholders receive the maximum value for their investment in the
Company.
Sincerely,
Mario D. Cibelli
Managing Member
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Contact:
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Marathon Partners
L.P.
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Mario Cibelli or Eric
Hidy,
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212-490-0399
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SOURCE Marathon Partners L.P.
Copyright t. 8 PR Newswire