02/09/2005 12:00AM

Youbet reaches deal to buy offshore site

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Youbet.com, the publicly traded account-wagering company, has reached an agreement to purchase the Curacao-based rebate shop International Racing Group, Youbet announced late Tuesday.

The agreement is contingent upon a review of IRG's financial statements and operations, a process commonly called due diligence, and the approval of Youbet's board of directors, according to Youbet's chief executive, Chuck Champion. The purchase price will not be disclosed until the company completes its due diligence, although Youbet did say that the company would make the acquisition using cash and by issuing new stock.

If the acquisition goes through, Youbet would become the first domestic account-wagering company to buy an offshore rebate shop. Rebate shops are coming under increasing scrutiny from the racing industry because of an indictment unsealed earlier this year in which more than a dozen individuals were accused of running an illegal gambling operation through accounts at four rebate locations, including IRG. None of the rebate locations was charged with a crime.

IRG, which is privately held, took in $140 million in bets in 2003 and $210 million in bets in 2004, according to Youbet. The shop is one of a handful of offshore betting locations that have grown markedly in the last decade by offering rebates on handle to attract bettors.

Champion said that Youbet has begun to form a committee of officials inside and outside the company to evaluate how Youbet would operate the rebate shop, in part to quell fears within the industry about the acquisition. Rebate shops have been criticized by many racing organizations, including the National Thoroughbred Racing Association, for failing to fully disclose how their businesses are owned and operated, and for operating without the regulatory constraints of domestic offtrack businesses.

The committee "will be working with horsemen, tracks, and regulators to develop state-of-the-art industry practices" that will include how to deal with transparency concerns of racetracks, Champion said.

Since the indictment that mentioned IRG was released, many racetracks, including Aqueduct, Fair Grounds, and Turfway Park, have cut off their signals to IRG and the other shops that were named. Two other major winter racing venues, Oaklawn Park and Tampa Bay Downs, had cut off IRG within the past three years. Youbet.com offers wagering on all of the tracks that have cut off the shops.

Champion said that IRG will be operated as a separate business from Youbet, and that it will continue to make separate agreements with racetracks for their signals. Tracks that have cut off IRG and other rebate shops could continue to provide their signals to the Youbet site without restoring the signal to IRG, Champion said.

"Youbet is not going to be using its existing relationships with tracks to the benefit of IRG," Champion said. "This will be a completely separate business, with its own contracts for signals."

Champion said that Youbet had been exploring the acquisition of an offshore location for six or seven months. Asked whether the indictment had given the company pause about pursuing the acquisition, Champion said, "It certainly caused us to go back and look at everything we had done so far, and convince us that we had to go forward in an appropriate and proper way."