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September 2, 2014

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Detroit businesswoman looks to expand empire

DETROIT -- Marian Ilitch is the intensely private matriarch of a business empire that includes one of the nation's largest pizza chains, two professional sports franchises and a wealth of real estate. Now she is poised to become one of the few private individuals to own a major casino.

State officials today are set to consider Ilitch's bid to buy out her partners in MotorCity Casino and become the sole owner of the venture, which takes in more than $400 million in revenue annually.

MotorCity, one of three Detroit casinos, is being sold because of the pending merger between MGM Mirage Inc. and Mandalay Resort Group. MGM already owns Detroit's MGM Grand Casino, and Michigan law prohibits the company from owning more than one casino in the city.

Ilitch and her family have won praise for their extensive investments in Detroit, a city that has struggled with rapid population decline and economic stagnation. But some people who have done business with them take issue with their tactics.

Ilitch, who is in her 70s, is the wife of Mike Ilitch, the slightly more visible half of the business team that started in 1959 with the opening of a pizza parlor in suburban Detroit. That first Little Caesars restaurant flourished into one of the biggest national pizza chains. The Ilitches' companies, which include hockey's Detroit Red Wings and baseball's Detroit Tigers, had combined revenue in excess of $1 billion last year.

Marian Ilitch was born and raised in the Detroit suburb of Dearborn, the daughter of Macedonian immigrants. She attended community college for a year and took just one accounting class. Before her marriage, she worked as a Delta Airlines reservations clerk.

Ilitch declined to be interviewed for this story. But over the decades, an image of the mother of seven has emerged as the financial brains to her husband's creative genius.

Mike Ilitch has repeatedly told the story of the day they opened that first restaurant in Garden City. So thrilled at having his own business, he gave the first two orders away for free. He was preparing to do the same with the third when Marian intervened and took the customer's money herself.

In recent years, Marian and Mike Ilitch have retreated into the shadows, allowing their children to be the public face of their businesses. Their son Christopher is president and chief executive of Ilitch Holdings; Mike Ilitch is chairman, and Marian Ilitch is vice chairwoman.

Former Mayor Dennis Archer recalled negotiations with the Ilitches around the construction of Comerica Park, a new stadium for the Detroit Tigers that opened in 2000. "I dealt more with Denise and Atanas," he said, referring to two of the Ilitch children. "But they (Mike and Marian) were clearly in the background."

Since the 1980s, the Ilitch family has been increasingly active in the Detroit real estate market. Many of their projects have been hailed as key elements in the city's effort to revive its downtown.

"I came to know them as citizens who cared deeply about the city of Detroit," Archer said.

The family, however, has its critics.

Some urban development and preservation advocates question why many historic properties owned by the Ilitches have stood empty and decaying for years. For example, the family's plan to tear down the long-vacant Madison-Lenox Hotel -- designated an endangered site by the National Trust for Historic Preservation -- has evoked public protests, and the city's historic commission has twice turned down the Ilitches' application for a demolition permit.

There also have been conflicts with other business people -- most recently with Marian Ilitch's partners in MotorCity Casino.

Ilitch, who currently owns 25 percent of MotorCity, is paying $525 million for the 53.5 percent stake in the casino owned by Mandalay Resort Group. She also is buying an 11.5 percent stake held by Atwater Entertainment, a group of more than 100 local investors, as well as the remaining 10 percent from another local investor, Tom Celani.

Herb Strather, a Detroit developer who was one of the founders of Atwater and said he recently rejoined the investment group, said Ilitch is buying the Atwater stake for about $106 million. That's about 5 percent less than the rate she is paying for Mandalay's shares.

"Mrs. Ilitch gave us a lowball offer," said Strather, who had teamed up with another prominent Detroit businessman, Peter Karmanos Jr., to make a failed, 11th-hour bid for the Mandalay stake after it emerged that Ilitch was negotiating.

But Vivian Carpenter, president of Atwater, said the deal was "good for investors."

A spokesman for Marian Ilitch, Tom Shields, refused to talk about specifics of the Atwater deal but noted, "The Atwater Entertainment partners voted overwhelmingly to accept the offer made for their shares."

The purchase agreement came after Atwater and Celani sued Ilitch, accusing her of violating the terms of their partnership when she negotiated unilaterally with MGM. They claimed they tried repeatedly to get in touch with Ilitch about bidding together for the Mandalay stake, but she refused to talk to them.

The lawsuit is to be dropped as part of the purchase agreement.

The Michigan Gaming Control Board is expected to scrutinize the proposed MotorCity sale at a Wednesday meeting. The sale is contingent on the board's approval and on the completion of the MGM-Mandalay merger, expected by June 30.

If the deal is completed, MotorCity will be one of the biggest casinos in the hands of a private individual. And although Nevada's first gaming license was issued to a woman, women owners are rare in the industry today, said David Schwartz, director of the Gaming Studies Research Center at UNLV.

Parties to the deal say Wednesday's meeting should go smoothly because Ilitch is already licensed as a casino owner because of her 25 percent stake.

Rob Russell, a gaming analyst with the Lansing law firm Fraser Trebilcock Davis Dunlap, said he would be surprised if Ilitch made any drastic changes at MotorCity. The casino has successfully marketed itself around the local automotive theme, he said.

"MotorCity's current management has been extremely responsive to the local market," he said. "That's probably one reason Mrs. Ilitch saw it as a good investment."

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