Churchill Downs Inc. has raised the stakes on online betting by announcing its deal to buy online rival Youbet. The racetrack operator, famous for the Run of the Races that takes place at its namesake track in Louisville, is confident that online horse racing betting will continue growing.

The purchase involves $126.8 million and could position Churchill Downs as the number one company in the online and phone betting industry. This has major importance for the company since live racing and on-track horse racing betting are not in their best moment.

According to Churchill Downs executives, online betting will account for nearly 14 percent of all betting on US thoroughbred racing in 2009, a 4 percent increase compared to last year. The company bets on the fact that placing bets with just one click will be even more appealing in the near future for those who enjoy betting on their favorite horses.

“Should the ADW channel follow in the path of other consumer goods, in terms of the percentage of transactions that occur online, there will be substantial future growth in ADW wagering,” Robert L. Evans, Churchill President and CEO, commented in a press conference.

A report shows that in 2008 $438 million were wagered in Youbet and the company obtained $85.8 million in profits. During the first nine months of 2009 the money wagered went up 13 percent and profits increased 8.6 percent, showing a good improvement in figures.

Both Churchill Downs and Youbet boards have approved the purchase, though it still has to be approved by Youbet shareholders. According to Churchill executives, the deal will be closed in 2010 and Youbet shareholders will get 0.0598 Churchill shares and 97 cents per each Youbet share they own.

Churchill Downs owns three other tracks, besides the Louisville track, located in Florida, Illinois and Louisiana. According to Evans, the company wants to preserve the balance sheet to carry out other agreements. "We'll continue to look around and see what's out there and hopefully do good stuff," he said.

On the other hand, Youbet CEO David Goldberg commented the transaction is the perfect union of technology, know-how and channel access and the company has a clear chance of becoming a market innovator in the horse racing market. Although the excitement experienced in a race track can’t be replaced, the grown in online horse racing proves the public is demanding online betting.