Smith family plans to take Speedway Motorsports private in $734 million deal

The Smith family wants to take Speedway Motorsports Inc. private in a deal worth more than $734 million, according to a securities filing Wednesday.

In a letter to shareholders Tuesday, SMI CEO Marcus Smith said that Sonic Financial Corporation has submitted a non-binding proposal to acquire all of the outstanding shares of Speedway Motorsports, which owns eight NASCAR race tracks nationwide including Charlotte Motor Speedway in Concord. Sonic Financial is a holding company owned by Smith’s father and SMI chairman Bruton Smith.

The Smith Family and Sonic already own approximately 29 million shares and control over 70% of the voting power of the company.

Marcus Smith noted that the $18 per share that his family will pay for the company’s outstanding shares represents “a significant premium” of 31% to Monday’s closing price of $13.94. The company’s shares closed Wednesday at $18.55.

SMI, which Bruton Smith founded in 1994, saw its shares surge to an all-time high of $43.63 in October 1999, and decline rapidly in the years following the recession that began in 2007.

The Smiths’ offer to take the company private comes months after NASCAR said it had submitted a non-binding offer to buy Speedway Motorsports competitor, International Speedway Corporation, which owns 12 tracks used in NASCAR’s Cup Series.

Marcus Smith cited financial headwinds facing the racing industry as a reason for the move.

“NASCAR racing has faced several challenges in recent years, and the company has been impacted by these challenges. NASCAR has indicated the sport would benefit from structural change. We believe (Speedway Motorsports) would be more able to compete in this challenging and changing environment as a private company,” Smith said.

In recent years, NASCAR has seen TV ratings and attendance numbers decline for a number of reasons, including the retirement of crowd favorites like Dale Earnhardt Jr., a slow economic recovery of the middle class and constantly changing race rules.

Marcus Smith.JPG
Marcus Smith, CEO of Speedway Motorsports, told shareholders in a letter Tuesday that Sonic Financial will seek to acquire all outstanding shares of the company.

Smith wrote that his family and Sonic are “best-positioned” to manage and oversee Speedway Motorsports as a private company.

“Given the Smith Group’s role in the sport and involvement in the company, we believe we are the best party to lead the company through the challenges ahead,” Smith wrote.

The company said that a special committee of independent directors appointed by SMI’s board will consider the proposal and make a recommendation to the board. The deal is likely to be approved by the board, which includes three members of the Smith family.

A Speedway Motorsports spokesman declined to comment. A NASCAR spokesman also declined to comment on the Speedway Motorsports bid.

Another racetrack deal

NASCAR made a similar bid in November to acquire International Speedway Corporation (ISC), the sport’s other main track operator. ISC’s CEO is Lesa France Kennedy, whose France family owns NASCAR. Two months after that deal was announced, NASCAR laid off dozens of workers, including some in Charlotte.

By purchasing ISC, the France family and NASCAR could more easily make changes at those tracks without shareholder approval.

The same logic applies to the Speedway Motorsports proposal.

One benefit to taking ISC and SMI private would be the freedom to make substantial changes to NASCAR’s schedule, something that has long been teased by those in the industry. NASCAR’s current five-year deals with the two track operators run through the conclusion of the 2020 season, so new negotiations will be necessary for the 2021 schedule.

If both SMI and ISC are private at that point, it will be far easier for NASCAR to adjust which tracks receive multiple race dates, or to even eliminate certain tracks from the schedule, when reaching those new agreements. Shareholders currently can criticize or protest potentially losing a major revenue race, but as private companies, both track operators would be able to make those decisions in conjunction with NASCAR.

For example, Speedway Motorsports could opt to rotate the All-Star race on a yearly basis instead of keeping the event at Charlotte Motor Speedway.

NASCAR’s 2020 schedule, which was released in March, was criticized by some fans for its inability to cut certain less-appealing tracks from the schedule. But as NASCAR president Steve Phelps explained on the Dale Jr. Download recently, the schedule makers didn’t have that kind of power given the current agreements with SMI and ISC.

We tried to mix up the schedule as much as we could with the limitations that we had. ‘Cause we had five-year agreements, 2020 is the fifth year of the agreement ... so we had to go to all the same race tracks,” Phelps said at the time.

As the retail and sports business reporter for the Observer, Katie Peralta covers everything from grocery-store competition in Charlotte to tax breaks for pro sports teams. She is a Chicago native and graduate of the University of Notre Dame.
Brendan Marks is a general assignment sports reporter for the Charlotte Observer covering the Carolina Panthers, Charlotte Hornets, NASCAR and more. He graduated from the University of North Carolina at Chapel Hill and has worked for the Observer since August 2017.
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