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Churchill Downs

(CHDN) - Get Churchill Downs Incorporated Report

entered into a definitive agreement to buy

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( UBET) in a cash-and-stock deal valued at $126.8 million.

Under the terms of the deal, Youbet shareholders would get 0.0598 a share of Churchill Downs stock plus 97 cents a share in cash for each share of Youbet stock owned. Youbet shareholders will own a 16% stake in Churchill Downs once the deal closes.

Youbet is an online horse-race handicapping and betting site.

The move by Churchill Downs, which carries out thoroughbred racing, particularly the Kentucky Derby, is an acknowledgment of the growing trend towards online gambling.

The merger is expected to close in the first half of 2010.

Shares of Youbet closed Wednesday at $2.41, while shares of Churchill Downs finished at $31.57.