Youbet Examining Possible TVG Deal

Youbet Examining Possible TVG Deal
Photo:, during an Aug. 5 conference call in which it reported a profit for the second straight quarter, said it is evaluating the effects of a possible merger with TVG.

The company Aug. 4 reported a pre-tax adjusted income on continuing operations of $3.04 million for the second quarter of the year, and $4.25 million for the year to date, so far reversing the trend of a volatile 2007, which saw suffer a $28.4 million annual loss.

During the Aug. 5 conference call, chief executive officer Michael Brodsky responded to a financial analyst’s question about potential future acquisitions, including the prospect of some sort of venture related to the possible sale of TVG.

“Obviously, this is the sort of thing that the company has to be on the lookout for,” Brodsky said. “We will always consider making an acquisition as long as it is going to generate positive returns for Youbet shareholders.

“In the case of TVG, we believe there are substantial synergies that might be realized if we were to combine our business with theirs. Obviously, we can’t get into specifics, but I can assure you that we are always on the lookout for opportunities--to the extent we are involved in that process--and we will be spending a great deal of time there.”

TVG, which has certain business relationships with, has been cited by new parent company Macrovision Solutions as a potential property it would like to sell. Other groups are believed to be interested in acquiring the horse racing network/ADW, including at least one or two racetrack entities, among others.

No further discussion about TVG or other potential acquisitions was mentioned during the brief question-and-answer session, which was restricted in participation to analysts and company investors. did not report net income or earnings per share in its Aug. 4 release of second-quarter financials, saying it was still evaluating potential impacts, if any, of the Tax Reform Act of 1986, including in the “event of changes in ownership,” and other factors.

Brodsky said the company was still focused on growth and profitability through its streamlined core wagering and tote units, the Youbet Express advance deposit wagering platform, and United Tote.

“We are pleased with the turnaround plan,” said Brodsky, who in April took charge of following the departures of former chairman and CEO Charles Champion and interim CEO Gary Sproule. “Containing expenses remains one of our top priorities.”

The company in February closed its troubled International Racing Group subsidiary, a one-time high-volume telephone rebate shop that was partly responsible for a $28.4 million loss posted by for 2007. IRG, which is at least partly the focus of a state and federal investigation into undisclosed wagering practices, was the subject of a now-adjusted $11 million write-down, or impairment, by on its revised annual report, which was recently filed with the U.S. Securities and Exchange Commission.

The increased write-down, which was originally qualified as $9.9 million, was necessitated by what the company recently termed a recalculation of a contractual earn-out payment due to former owners of IRG. said in SEC filings it is trying to reduce the $4.3 million recalculated payment, which is due Aug. 31, but officials declined to comment on any progress related to that endeavor during the conference call.

“We are looking into all of our options,” Brodsky said.

Youbet reported its handle for its Youbet Express platform was $113.8 million in the second quarter, a 12.6% decrease from the same period last year, but said its net revenue minus track and licensing fees, increased 1.4% to $9.2 million.

The overall handle decline was blamed on a variety of factors, including the national economy, but also, in part, on the ongoing revenue sharing dispute between horsemen groups and racetracks, which has resulted in the curtailment of racing signals to a variety of ADWs, including Youbet.

“Our new approach has allowed us to weather the current storm,” Brodsky said.

Shares of Youbet stock were up 17.7% to $1.46 in late morning trading Aug. 5.

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