US Online Gambling Consolidates in Churchill Downs Move

The small number of online gambling operators in the US shrank as Churchill Downs acquired Youbet in an expansion of the company's Internet gaming capabilities.

Churchill Downs bought out one of the few competitors it faces in the US online gambling market by purchasing Youbet.com. While the US Department of Justice has said it considers all Internet gambling illegal, it curiously continues to allow TwinSpires, the Internet branch of Churchill Downs, to operate unimpeded.

Churchill will exchange cash and stock worth $126.8 million to take over Youbet, which offers Internet wagering on horse races from tracks around the world. The bid equals about $2.84 a share for the online gambling company, which rose to $2.60 upon announcement of the deal, a rise of 7.9%.

Churchill Downs stock remained level after the statement was released, hovering at $31.57 per share.

Churchill officials say the deal was conceived as a plan to prepare to meet the growing public demand for online gambling. No mention was made of the US protectionist policies, or the flouting of DoJ regulations by Churchill Downs.

The merger of the two companies may take six months or more, as approval from Youbet shareholders and financial regulators is obtained. Youbet investors are expected to receive 0.0598 shares of Churchill stock, along with 97 cents, for each share of Youbet they own.