Louisville-based racetrack company Churchill Downs Inc. announced Wednesday it is acquiring major online betting platform operator Youbet.com in a deal valued at $126.8 million.
Youbet also owns United Tote, a leading provider of pari-mutuel tote services to racetracks such as Churchill Downs, Keene land and the New York Racing Association tracks, and is the exclusive provider of live horse racing footage and results to ESPN.com and CBSSports.com.
"We believe this combination should enable us to accelerate the development of new technology-enabled features and services that horse racing customers who wager via the (advance-deposit wagering) channel want, and that can attract new customers to racing," Robert L. Evans, Churchill Downs president and CEO, said in a news release. "We believe that the anticipated additional growth in our ADW channel handle and revenue, coupled with the expected cost synergies, make this transaction a good way to deliver additional value to CDI and Youbet shareholders."
Customers of TwinSpires.com, Churchill's present ADW platform, and California-based Youbet.com will be able to access accounts, make wagers and withdrawals just as they do now, according to the release.
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Shareholders of Youbet (NASDAQ: UBET) will get a ratio of 0.0598 shares of Churchill Downs stock (NASDAQ: CHDN) plus 97 cents a share, according to the release. The transaction could be adjusted so Churchill does not have to issue more than 19.6 percent of its outstanding common stock; after the deal, Youbet.com shareholders are expected to own about 16 percent of Churchill Downs.
Youbet executive chairman Michael Brodsky will join Churchill's board, and executive and strategy committees.
The release issued by the two companies outlines areas of potential benefit:
■ Anticipated revenue opportunities.
■ Cost-reduction synergies.
■ An enhanced capability to pursue other online business opportunities.
■ Secure access to a stable, established tote system.
■ A greater ability to develop and introduce new technology-enhanced features and services that ADW customers want, and that can attract new customers to racing.
The deal will give Churchill a bigger footprint in the lucrative ADW market, which is less than 14 percent of all wagering now but is the main area of growth in betting on horse racing, according to the release.
About $10 million in cost savings is projected during the next year by eliminating duplications between the two companies.
The merger was unanimously approved by the boards of directors of both companies but is conditioned on approval of Youbet shareholders and regulators. It is expected to close in the first or second quarter of 2010.
Executives of both companies will discuss the deal in conference calls Thursday morning.