02/13/2006 12:00AM

Youbet completes United Tote purchase


Youbet.com Inc., the online horse race broadcasting and wagering company, has completed its purchase of United Tote, a bet-processing company, for $31.9 million in cash and the assumption of $14.7 million in United Tote debt, Youbet announced Monday.

The acquisition is the second made by Youbet over the past 12 months to expand its business beyond taking horseracing bets from customers over the Internet and the telephone. Last year, Youbet purchased a privately owned offshore rebate shop, International Racing Group, which is based in Curacao.

Charles Champion, Youbet's chief executive, said Monday that United Tote would operate as a "fully independent subsidiary" of Youbet, and that United Tote's chief executive officer, Joe Tracy, and other top officials would continue to manage United Tote's operations.

"We're looking to them to continue to guide the company forward," Champion said. "There will be some things like finance and [human resources] that we can do together, but our management will not be directly involved in how they operate."

Bet-processing companies like United Tote derive the vast majority of their revenues from fees that are based on the amount of bets they commingle into parimutuel pools. The fees typically equal 0.25 percent of handle, although those fees can be higher based on the level of service provided.

Champion said that Youbet would use United Tote's hardware and software to market racing and sports games, and also said that Youbet plans to offer racetracks the ability to design awards programs for horseplayers based on wagering data that could be gleaned from both Youbet and United Tote's bet-processing systems. Champion said that horseplayers' privacy would be protected in any of the programs that Youbet designs.

Champion also said that United Tote under Youbet would not offer individual bettors direct access to bet-processing data unless a racetrack approved the practice. Tote companies like United Tote have in the past designed interface programs that allow large bettors to scan betting information and wager directly into commingled pools using specialized computer betting programs.

"While it's currently a feature and functionality that is available, it's not something we're looking at doing, and if we do do it, then we will want the track's approval before we go ahead," Champion said.

United Tote's biggest customers are the tracks owned and operated by the New York Racing Association and Churchill Downs Inc. The company, which was privately held, processes about 35 percent of the $15 billion annual parimutuel handle in North America.

The $31.9 million acquisition was financed by approximately $9.7 million in cash, $10.2 million in promissory notes that come due over the next two years, and the issuance of 2.2 million shares of Youbet stock to United Tote's former owners, with each share valued at $5.50, according to Youbet. The company had previously estimated that the acquisition would cost $34.2 million in cash and stock.

On Monday, the company's stock closed at $4.84 per share, up 34 cents, or 7.56 percent, on volume of 660,000 shares, roughly double the typical trading volume.