By David Stratton
Youbet.com, which recently announced a desire to break into the Nevada horserace betting industry, took a huge step in that direction with a proposal to purchase Vic Salerno’s American Wagering Inc. (AWI) out of bankruptcy for $9.5 million.
American Wagering owns and operates 49 Leroy’s sports books in Nevada as well as Computerized Booking Systems (CBS), which supplies nearly 90 percent of the sports betting computer systems in the state.
For about a year, American Wagering has been operating under Chapter 11 protection of the Bankruptcy Code.
Youbet.com, the country’s largest Internet provider of off-track betting, submitted a reorganization plan to the Bankruptcy Court seeking approval to acquire all shares of American Wagering stock for $9.5 million, about half in cash and half in Youbet.com common stock.
In an effort to block a takeover, American Wagering asked the Bankruptcy Court to exclude Youbet.com — as well as other interested companies — from filing reorganization plans to acquire AWI, but the Bankruptcy Court denied the request.
The Court has scheduled a hearing on Nov. 12 to consider motions associated with the proposed acquisition. If the Court rules in Youbet.com’s favor, it will consider the reorganization plan — as well as any competing plans — at a hearing scheduled for Feb. 14, 2005.
Officials for American Wagering were unavailable for comment.
Youbet.com officials said the proposed acquisition is part of an overall strategy to expand its revenue base and enter "ancillary areas" of the betting industry.
"If completed, the acquisition would enhance Youbet’s entry into the Nevada market where we believe there are opportunities to work on various business initiatives with casino operators," said Charles F. Champion, Youbet.com chairman and CEO.
Those business initiatives include providing the technology that would allow Nevada casinos to offer off-track betting for their customers. Youbet.com announced several months ago it had opened an office in Nevada in order to pursue those initiatives.
At the time, Victor Gallo, who heads Youbet.com’s Nevada operations, said the company was seeking a casino partner THAT wanted to establish an account wagering system that would be allowed under legislation passed last year.
By simply providing the technology, Youbet.com would not have been required to file for a Nevada gaming license. The proposed takeover of AWI would need the approval of the Nevada Gaming Commission, the Bankruptcy Court and AWI creditors and shareholders.
"We believe our offer represents an excellent financial and strategic proposal, not only for AWI’s creditors and shareholders, but for Youbet shareholders as well," Champion said. "By combining the operations of two leaders in their respective sectors, we can continue our track record of serving customers of wagering and entertainment products and services, while realizing the operating efficiencies inherent in combining the companies’ overheads.
"The stock component of our offer would allow current AWI shareholders to participate in the future of the combined entity and our plans for further growth."
Youbet.com is the largest Internet provider of off-track betting in the United States. Its members can watch races via satellite and, in most states, wager on them via Youbet’s exclusive closed-loop network.