Churchill Downs & Youbet.com Merge to Dominate U.S Market12th November 2009 8:00 am GMT
In a bid to expand their combined presence in the U.S horseracing online wagering market and to stake out a dominant position ahead of any possible liberalisation of the online gambling market, leading advance deposit wagering operators Churchill Downs Incorporated and Youbet.com Inc have entered into a definitive merger agreement under which Churchill Downs will acquire all of the outstanding shares of Youbet.com in a transaction valued at approximately $126.8 million.
Churchill Downs Incorporated (CDI), operator of U.S online wagering service TwinSpires.com, said that the deal would bring "significant value and opportunity to both customers of the combined business", with a projected $10 million in annualized cost savings to be realised by combining the companies.
Based on CDI's closing price on Tuesday, the transaction represents a value of approximately $2.84 per Youbet.com common stock and a premium of 28% over Youbet.com's closing price on Tuesday.
Under the terms of the agreement, Youbet.com shareholders will receive a fixed ratio of 0.0598 shares of CDI stock plus $0.97 in cash for each share they own, with Youbet.com shareholders expected to own approximately 16% of CDI at the close of the deal.
"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 ADW channel want, and that can attract new customers to racing," said Churchill President and CEO Robert L Evans.
"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."
CDI said that the resources of the combined business would also enable it to pursue other online business opportunities beyond pari-mutuel wagering, should such opportunities develop.
"We are excited about what this opportunity to combine Youbet with CDI will mean for Youbet customers, shareholders and employees," said David Goldberg, Youbet.com President and CEO. "Youbet shareholders are receiving a significant premium over the current trading price for their shares and, through their ownership of CDI shares, the opportunity to participate in the potential upside of the combined company."
The merger has been unanimously approved by the Board of Director's of both companies but is still conditional upon the approval of Youbet.com shareholders, the receipt of required regulatory approvals, and other customary closing conditions. The transaction is expected to be finalised during the first or second quarter of 2010.
Youbet.com also announced yesterday its results for the third quarter of 2009, with total revenues falling 5% to $27.9 million, while net income dropped to $0.8 million versus $2.8 million a year ago (more).
Shares in Youbet.com Inc (Co. Profile) (NASDAQ:UBET) gained 8.56% in trading yesterday following the announcement and will commence trading at $2.41 per share in New York later today.