Churchill Downs Inc. to Buy Horse Gambling Website

Gambling News - November 13th, 2009 - Written by Glen

A merger has been announced by Churchill Downs Inc., the owner of the track that hosts the Kentucky Derby. The merger is between Churchill Downs Inc. and Youbet.com, one of the largest online racebooks in the world.

In spite of anti-online gambling laws in the States, wagering on horse races over the Internet has always received some clemency from federal regulations. Online horse gambling has remained unimpeded throughout the war on online gambling, and the merger will further extend Churchill Downs' reach over the online wagering world.

Churchill Downs Incorporated will acquire all shares of Youbet.com for a transaction worth roughly $128.6 million. This price was based on the closing price per share as of Tuesday, November 10th, 2009. Shareholders of Youbet.com stock would receive $0.97 cents in cash as well as a fixed ratio of .0598 shares of Churchill Downs Inc. common stock. These rates have not yet been set in stone, and it is possible that the cash to CDI shares ratio could be adjusted, raising the amount of liquid assets while summarily decreasing the stocks received in trade.

As stated in CDI's press release, the trend of online horse wagering is continuing to rise. While they have estimated that barely 14% of all horse wagering comes in through the Internet, they expect this figure to increase over time.

The legality of the merger has infuriated many supporters of online gambling, as the state of Kentucky has recently tried to crack down on other forms of Internet gambling. The ruling has yet to be determined by courts in Kentucky, though they may be hard pressed to establish a precedent against online gambling now that this merger has been announced.

Youbet.com is publicly traded under NASDAQ:UBET. They provide horse racing content to both ESPN.com and CBSSports.com, and had reported revenue of $85.8 million dollars in 2008. The merger is expected to save both companies $10 million dollars in annual cost.

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