Daytona 500: Will NASCAR and International Speedway Corp. merge?
When NASCAR founder Big Bill France began plans to build Daytona International Speedway in 1953, he formed a company specifically for the purpose of operating the motorsports facility separate from the stock car race-sanctioning authority.
Now, more than 66 years later, that separation might be coming to an end, as NASCAR looks to merge with what is now known as International Speedway Corp.
Simply put: NASCAR is the entity that puts on stock car and truck races. ISC is the company that owns the actual physical tracks where those races are held: 13 tracks all told, including Daytona International Speedway, which opened in 1959.
Here’s how it would work: To take ISC private, the France family on Nov. 9 offered to buy back the outstanding shares of ISC stock that they don’t already own. The Wall Street Journal estimated the buyback could cost $1.85 billion.
While NASCAR and ISC officials have been generally quiet about why the France family wants to combine the two companies, here’s what we know about the potential deal.
1. Why do it?
The truth is, it makes a lot of sense.
ISC and NASCAR already essentially operate as a single company, even though technically they aren’t.
Both are headquartered in the same building: the International Motorsports Center across from the Speedway.
Both continue to be led by the France family.
Jim France, son of the late Big Bill France, serves as chairman and CEO of NASCAR.
He took over on an interim basis when nephew Brian France took an indefinite leave of absence from the company following a DUI arrest in Bar Harbor, N.Y., in August.
Jim, who has since had the interim tag removed, is also the chairman of ISC.
His niece (and Brian’s sister), Lesa France Kennedy, serves as CEO of ISC and is a member of NASCAR’s board.
The fates of both companies are also intertwined, as what happens to one directly affects the other.
Jim France, in a Nov. 9 news release, explained the rationale for merging the two companies: “In a highly competitive sports and entertainment landscape, a more unified strategic approach is important to our future growth.”
Combining the two companies would allow NASCAR to operate more efficiently and trim costs by eliminating duplications in its operations.
It would also allow NASCAR to more quickly respond to new trends and changes in fan preferences.
Perhaps just as importantly, it would also end ISC having to answer to public shareholders whose objectives might differ from the France family.
Rather than focusing on the daily fluctuations of ISC’s stock price, operating as a private company would allow the combined NASCAR/ISC to focus on long-term objectives, including figuring out how to reverse the shrinkage of its fan base.
2. Is going private a thing, now?
The answer is yes, thanks to a greater availability of private financing.
Historically, a big carrot for companies to hold initial public offerings was the opportunity for a huge infusion of cash.
But going public comes with a price: the need to follow Securities and Exchange Commission regulations including its requirement for public companies to disclose financial data as well as report anything that could affect stock value.
If a public company’s quarterly earnings fail to meet expectations, shareholders “can get really upset and sell their shares of the company,” said Cardiff Garcia, a co-host of National Public Radio’s “Planet Money” show, in a podcast last August. “The stock price might fall, and everybody gets upset.”
Taking ISC private eliminates that pitfall.
It also would be in keeping with a growing trend.
A report by global management consultant firm Bain & Co. found the number of public-to-private conversions in 2017 significantly increased from 2016, with the combined value of those buyouts nearly doubling to $180 billion.
Bloomberg News and other media outlets have speculated in recent months that the France family might be seeking private financing for NASCAR by selling a minority stake while retaining control of the company.
But to attract private financing, it helps to have tangible assets.
That’s what NASCAR would instantly gain by merging with ISC.
3. How else might it help NASCAR?
NASCAR President Steve Phelps acknowledged in an interview with The Daytona Beach News-Journal’s Ken Willis that the sport may have “lost its way” in recent years by trying to broaden its appeal at the expense of its core fan base.
This acknowledgement comes as ISC continues to see a slow but steady decline in admissions revenues as well as a drop in NASCAR’s TV ratings.
At the Speedway, ISC has added more amenities for NASCAR fans in an effort to boost ticket sales.
It is also working to diversify its sources of revenue by hosting more non-motorsports events, such as music festivals like the Country 500, which recently ended a three-year run at the Speedway, and a Christmas light show.
That strategy was the driving factor behind ISC’s $400 million “Daytona Rising” makeover of the Speedway, completed in January 2016, as well as the company’s $105 million investment to develop One Daytona and revamp the adjacent Shoppes at One Daytona.
While ISC officials express confidence that those capital investments will eventually pay off, they represent a hefty gamble.
Wall Street tends to punish public companies that don’t produce immediate results.
Taking ISC private would rid it of the pressure of having to answer to impatient public stockholders and Wall Street analysts.
4. Would it be good or bad news for the Daytona Beach economy?
That depends on how you look at it.
NASCAR recently confirmed layoffs, including a handful at its Daytona Beach headquarters.
Merging with ISC could potentially cause further layoffs as redundancies in staff positions are eliminated.
But in the long run, it could eventually produce more jobs here by creating a healthier NASCAR that can successfully find a way to grow its fan base, as well as its bottom line.
5. So will the merger actually happen?
At this time, it’s anybody’s guess.
ISC officials repeatedly declined to comment on the status of the France family’s buyout offer in the company’s latest conference call with stock analysts to discuss its 2018 fourth quarter earnings.
They also reemphasized that there can be no assurances that the merger will take place.
All they would confirm is that a special committee has been formed of independent members of ISC’s board of directors to evaluate the France family’s offer.
That special committee is led by board member and Brown & Brown Inc. insurance company chairman J. Hyatt Brown.
While ISC’s stock price inched higher after the company announced the France family’s offer to pay $42 a share, at a time when the stock was trading at just over $39 a share, it has continued to hover just above that offer price.
If it remains in that vicinity, the France family just might be willing to increase its offer enough to complete its proposed buyout.
Time will tell.