UPDATE 2-Churchill Downs to buy Youbet.com for $126.4 mln

* Deal a 19 pct premium over Youbet's Wednesday close

* Deal to result in annual savings of $10 mln (Adds details, updates share movement)

Nov 11 (Reuters) - Churchill Downs Inc (CHDN.O), host of the Kentucky Derby, agreed to buy Youbet.com Inc (UBET.O) for $126.4 million to tap into new technologies as it expects more people to place bets online.

The cash-and-stock deal values Youbet at about $2.86 a share, a premium of 19 percent over its Wednesday close of $2.41.

Churchill expects the deal to add new technology and features that horse racing customers who wager online want, Chief Executive Robert Evans said in a statement.

Currently less than 14 percent of the bets on U.S. horse racing are placed online and Churchill expects the number to rise, consistent with recent trends toward online transactions in other consumer industries, it said.

All the directors and certain shareholders of Youbet, who combined represent 24 percent of its outstanding shares, are in favor of the deal.

The deal, which is expected to close within the first half of 2010, will result in annual cost savings of about $10 million, Churchill said.

Shareholders of Youbet will get 0.0598 of Churchill common stock and 97 cents in cash for each Youbet share they own. They will own 16 percent of the combined company after the deal's close.

Churchill Downs owns horse racing tracks in Florida, Illinois, Kentucky and Louisiana that host such high-profile races as the Kentucky Derby and Kentucky Oaks.

Shares of Youbet rose 10 percent to $2.65 in trading after the bell, while those of Churchill were unchanged from their close of $31.57 Wednesday on Nasdaq. (Reporting by Abhishek Takle in Bangalore; Editing by Deepak Kannan and Savio D'Souza)