Youbet.com Wants to Buy High-Volume Shop
by Tom LaMarra
Date Posted: 2/9/2005 7:40:52 AM
Last Updated: 2/11/2005 5:42:23 PM

Youbet.com, which recently topped the $1-billion mark in handle, announced Feb. 8 it has a letter of intent to acquire International Racing Group, the Curacao-based account wagering company named but not charged in an 88-count federal indictment that alleged illegal gambling.

IRG, known within the pari-mutuel industry as Holiday Beach, caters to high-volume customers. The company, which offers rebates, handled $140 million in 2003 and $210 million in 2004, according to figures provided by Youbet.com.

Youbet.com said the acquisition is subject to due diligence and could be completed by the second quarter of this year. Youbet.com, which plans to operate IRG as a separate entity, has formed an independent committee to review IRG and ensure it employs "best practices," the company release said.

IRG accepts telephone wagers only. Youbet.com called the company "privately held, licensed, and regulated."

IRG is one of several companies denied the New York Racing Association signal in the wake of the federal indictment. Churchill Downs Inc. also suspended its agreements with IRG and other services named in the indictment.

NYRA is reviewing those contracts and developing protocol for wagering services that take its signal. Youbet.com officials said IRG customers would benefit from the proposed purchase because Youbet.com carries NYRA racing.

"One of our core growth initiatives has been to expand the scope of our (advance deposit wagering) product line through the acquisition of other pari-mutuel wagering companies that would be accretive to our operations," Youbet.com chairman Charles Champion said in a release. "The acquisition of IRG, which has built up a strong and loyal customer base under the direction of Lou Tavano, would, if completed, be consistent with this goal."

In a 2004 interview with The Blood-Horse, Tavano said IRG made an effort to work with the pari-mutuel industry after the Breeders' Cup Ultra Pick 6 fraud of 2002. He said operations such as Holiday Beach have been mischaracterized because of the negative connotations of "offshore" wagering.

"I believe we are bringing money to the table and paying money to tracks that otherwise wouldn't flow to the tracks," Tavano said at the time. "If we went out of business, our players wouldn't go back to the track and bet through the windows. Actually, we're taking wagering handle away from places that wouldn't contribute anything to the tracks."

Holiday Beach and other high-volume shops are said to pay up to 6.5%--double the industry standard--to obtain signals.

The Youbet.com release included comments from John Roark, president of the National Horsemen's Benevolent and Protective Association. The National HBPA, during its winter convention in January, released a white paper that showed how horsemen receive much less from account wagering than they get from on-track bets. The National HBPA at the convention didn't take a formal position on rebates.

"Off-track wagering is a complementary business for the horse racing segment, and the appreciation of it by industry participants should only increase as the visibility of licensed, public companies continues to grow," Roark said in the release. "We believe the proposed acquisition of IRG, given Youbet's leadership in setting compliance and regulatory standards, makes this transaction one that will benefit racetracks, horsemen's groups, and the industry at large."

Gregg Schatzman of Schatzman & Associates will assist the Youbet.com committee in the review of IRG. Youbet.com said Schatzman is the former chief of investigations for the Nevada Gaming Control Board.

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