Justice Department questions internet acquisition

Churchill downs to cooperate with information on Youbet acquisition agreement

The US Department of Justice is sticking it inquisitive nose into a $126.8 million agreement by the Kentucky horseracing giant Churchill Downs to buy Internet gambling firm Youbet.com....but it's more about anti-trust precautions than the legality of online horserace betting.

The US horse racing industry benefits substantially by being exempted from federal laws regarding online betting.

This week the horseracing group said that it would cooperate fully with the DoJ regarding the transaction. The DoJ has apparently requested additional information and documentary material in connection with the parties' proposed merger transaction. These actions, commonly referred to as "second requests," have the effect of extending the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended ("HSR Act"), until 30 days after both parties have substantially complied with the requests, subject to any modifications of the requests to which the DOJ may agree.

"CDI and Youbet are in the process of gathering information to respond to the second requests and are working cooperatively with the DOJ as it reviews the merger," a spokesman said.

In November last year (see previous InfoPowa reports) Churchill Downs and Youbet jointly announced agreement on the deal, which will see CDI acquire all of the outstanding shares of Youbet, in a transaction valued at approximately $126.8 million based on the Nov. 10, 2009 closing price of CDI common stock.

CDI, headquartered will substantially increase its Internet betting footprint when the Youbet.com deal is completed. The company is betting that online wagering will keep up a fast pace in an industry that has been sluggish during the recession as gamblers tighten their spending.

CDI owns and operates four thoroughbred racing facilities: Arlington Park in Illinois, Calder Casino and Race Course in Florida, Churchill Downs Race Track in Kentucky and Fair Grounds Race Course & Slots in Louisiana. It also operates slot and gaming operations in Louisiana and Florida.

CDI also owns off-track betting facilities, TwinSpires.com and other advance-deposit wagering channels, television production, telecommunications and racing service companies such as BRIS and a 50-percent interest in the national cable and satellite network, HorseRacing TV, which supports CDI's network of simulcasting and racing operations.

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