Are Rivals Giving Dover The Once-Over?

By Gene G. Marcial

Going For A Song
Big board-listed Dover Downs Gaming & Entertainment (DDE ) has everything major casinos want, and some players believe that this "racino" is ripe for a takeover. Spread over 78 acres in Delaware, Dover has the works: Dover Downs Slots, a casino packed with slot machines; Dover Downs Raceway, a 5/8-mile harness track; and a luxury hotel.

Mike Snyder of Gabelli Asset Management, which has an 8% stake, says some casino operators, such as Harrah's Entertainment (HET ), or other racinos like MTR Gaming Group (MNTG ), would find Dover attractive. Harrah's, which is buying Caesars Entertainment (CZR ), has stated it is looking to acquire a racino. MTR owns and runs Mountaineer Racetrack & Gaming Resort in West Virginia. In a buyout, Dover, now at 9.77, is worth 15, figures Snyder. It was spun off by Dover Motorsports in March, 2002. So the two years, which Internal Revenue Service rules require before a tax-free spin-off can be bought out, have elapsed.

Dover's slot casino is now managed by Caesars. Dover may not renew the contract, which expires in December. That could be more reason for Harrah's to buy Dover. Jeff Martin of Roth Capital Partners, who rates Dover a buy, sees earnings of 70 cents a share in 2004, on sales of $207.2 million, and 85 cents in 2005, on $214.5 million. Dover, Harrah's, and MTR did not return calls for comment.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

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