Handicapping Dover Downs

Hardly had Dover Downs Gaming & Entertainment (DDE ) gone public than some pros started rumors that it was buyout bait. It operates Dover Downs Raceway, a harness track in Delaware; a nearby hotel and conference center; and an 80,000-square-foot video-lottery casino. Dover began trading on Mar. 18 on a when-issued basis at 10.50, prior to its spin-off by Dover Motor Sports on April 1. It's now nearly 14.

Adding to the intrigue: Investor Mario Gabelli owns 610,330 shares, or 6%, of Dover Downs--including 166,380 shares bought in mid-April. "Gabelli is noted for spotting undervalued media-and-entertainment companies," says Charles LaLoggia, editor of SuperStock Investor, which focuses on buyout bets. In an SEC filing, Dover said 43% of its stock was controlled by the John Rollins estate. Observes LaLoggia: "When a big chunk of stock is held by the estate of a founding shareholder, it often leads to a sale of the company." He expects operators, such as Magna Entertainment or Park Place Entertainment, whose unit, Caesar's World Gaming, manages Dover's casino, to make a move on Dover. It posted first-quarter sales of $51.7 million, up from $46.4 million a year ago. Earnings slipped from 21 cents a share to 19 cents, due to adjustments as an independent outfit. First Call sees Dover earning 84 cents in 2002 and 94 cents in 2003. Dover did not return a call for comment.

By Gene G. Marcial

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