01/27/2009 12:00AM

Betfair buys TVG for $50 million


Betfair, the British online bet matchmaking company, has purchased Television Games Network, the U.S.'s largest horse race account-wagering and broadcasting company, the companies announced late Tuesday.

In a release, the companies said that Betfair purchased TVG for $50 million in cash consideration. TVG was owned by Macrovision, which acquired TVG's former parent, Gemstar-TV Guide, in 2008. Macrovision had begun to seek the sale of TVG shortly after purchasing Gemstar.

The acquisition unites two unlikely partners. Betfair, which was founded in 2000, operates a website that allows its customers to make bets with other customers, using lines posted by the customers themselves, a process that is akin to bookmaking. TVG operates an account-wagering platform that allows customers to wager into commingled parimutuel pools, on races held in the U.S. and foreign countries.

Betfair's service is extremely popular in the United Kingdom, where bookmaking is legal, and the company has been lauded by its supporters for providing an innovative way for people to bet on sports. However, U.S. racetracks have remained wary of the company's business model because of perceptions that the service could allow race-fixers to profit from holding a horse. In addition, bookmaking is illegal in the U.S.

The political climate surrounding online gambling is far more conservative in the U.S. than in the United Kingdom. TVG has typically limited its business to customers in states where account wagering is explicitly legal, though the company has reached sub-licensing deals with other domestic account-wagering companies that operate in gray-area states. TVG collects a portion of the wagering handle that is made as a result of the agreements.

TVG officials did not immediately return phone calls late on Tuesday after the announcement was made.

In a release, David Yu, the chief executive of Betfair, said: "We have always been attracted by the operating strength of TVG together with its conservative and prudent regulatory approach. Its values are very much aligned with those of Betfair. We have waited to enter the U.S. market until we had a high-quality, and above all, legal product offering, and we believe with this acquisition we have secured those goals."

TVG is available in more than 30 million homes in the U.S. through cable and satellite television subscriptions. Through the first three quarters of 2008, handle through TVG's Oregon-based hub was $384.2 million.

Account wagering in the U.S. is currently dominated by four companies: TVG, Youbet.com, XpressBet, and Twinspires.com. XpressBet, which is owned by Magna Entertainment Corp., has a signal-sharing partnership with Twinspires.com, which is owned by Churchill Downs Inc. Magna and Churchill also co-own HorseRacing TV, a television network that competes with TVG. TVG's sub-licensing partner is Youbet.