Youbet.com, which earlier this year purchased an offshore wagering company, has entered into an agreement to purchase United Tote for $49 million, the company announced Dec. 1. United Tote supplies tote services to more than 90 pari-mutuel facilities in the North America.
In a conference call with analysts and investors, Youbet.com chief executive officer Chuck Champion said the purchase will be made with $34.2 million in cash, with expected proceeds from an "equity financing," and refinancing of $14.4 million of secured United Tote debt for equipment currently leased to its customers. He hopes the acquisition of United can close within 60 days and be added to the company's fiscal 2006 operating results.
Founded in 1959, United Tote supplies tote systems, terminals, and other pari-mutuel wagering services that process more than $7 billion in handle each year, 90% of it in North America. United Tote has contracts with 94 racing facilities in North America, including Kentucky racetracks, under a contract signed in late 2003, and the New York Racing Association, which switched to United Tote from Amtote in November of 2004. It also services facilities in 11 countries including Hong Kong, Korea, Mexico, and other foreign markets.
United Tote would be a wholly owned subsidiary of Youbet.com, though it would move from privately held to publicly held. As a publicly-held company, Youbet.com should be able to secure better financing on the secured debt.
United Tote is also developing new games content around pari-mutuel wagering including Fanta-Bet, a new competition wagering game that is currently being tested. With a $20 entry fee, Fanta-Bet players compete for daily prizes as they used "fantasy dollars" to make wagers on live racing.
Another strength that United Tote offers, according to Champion, is the long-term relationships they have with their existing clients.
"Eighty percent of their customers have been with United Tote for at least 10 years," he said. "We also have relationships with these tracks and we can add a new element to the relationship. Improving the tote technology can only strengthen that relationship.
"Together we can offer more solutions to tracks. All the talk has been about what can we do to advance the technology and bring in a new fan base. We are going to be able to offer an integrated solution.
"We're going to reach out to the entire industry," Champion said. "They are not satisified at all and they shouldn't be. We have an opportunity to take what we know and what United Tote has learned and provide a better solution to grow more customers."
United Tote generated approximately $23 million in revenue and $2.8 million in earnings before interest, taxes, depreciation, and amortization on a consolidated basis for the 12-month period that ended Dec. 31, 2004.
Youbet.com this year acquired International Racing Group, a Curacao-based account wagering service that caters to high-volume players. IRG was recently licensed by the Oregon Racing Commission to operate a betting hub.
Youbet.com is an online wagering company headquartered in Southern California. Its betting hub also is located in Oregon.