M&A

12 November, 2009

Youbet.com shares jump after Churchill Downs takeover

By Viraj Nair

Nov 12 (Reuters) - Shares of Youbet.com Inc (UBET.O) rose 14 percent on Thursday, a day after Churchill Downs Inc (CHDN.O), the host of the Kentucky Derby, bought the online horse betting company in a cash-and-stock deal.

"I think it is a good deal for Youbet shareholders. They get a premium to where the stock was trading down, plus the opportunity to participate in the future appreciation of Churchill Downs, in what is now a stronger company," B. Riley & Co analyst Mike Crawford said.

On Wednesday, Churchill Downs, which owns and operates four racetracks throughout the U.S., agreed to buy Youbet.com in a deal that valued the company at about $2.86 a share. [ID:nBNG510854]

The deal will help the combined company to lure more customers to bet online on horses and horse racing, or advanced deposit wagering (ADW), Crawford said.

"Given the combination of Youbet's ADW platform with Churchill Downs-owned TwinSpires, which has been the fastest growing ADW this year, they will have 50 percent of the U.S. market and the best brand in horse racing," he added.

Currently less than 14 percent of the bets on U.S. horse racing are placed online, but Churchill said it expected the number to rise, consistent with recent trends toward online transactions in other consumer industries.

"I think it's a win for everybody," analyst Crawford said.

Shares of Youbet were up 12 percent to $2.68, while those of Churchill were down 2 percent at $30.79 Thursday morning on Nasdaq. (Reporting by Viraj Nair in Bangalore; Editing by Unnikrishnan Nair) ((viraj.nair@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: viraj.nair.reuters.com@reuters.net))

Source: http://www.reuters.com