Churchill Downs Inc. (CHDN) has agreed to buy the bankrupt New Orleans Fair Grounds (search) in a $47 million deal that requires federal bankruptcy court approval, the New Orleans track announced Wednesday.

The announcement came after the Fair Grounds had reached a preliminary agreement with horse owner Mike Pegram for $40 million that would have made Pegram an 86 percent owner of the track. Pegram declined an offer to match the Churchill offer, the Fair Grounds said.

"In the end, the Churchill proposal ... is most favorable for our unsecured creditors and minority stockholders," Fair Grounds president Bryan Krantz said in a statement.

Fair Grounds officials expect a confirmation hearing in U.S. Bankruptcy Court on Sept. 24, according the statement.

Louisiana horsemen are a chief creditor in the track's bankruptcy reorganization and were involved in talks because a court has ruled they are owed $90 million from the underpayment of video poker proceeds to racing purses. The Fair Grounds and the horsemen have agreed to settle that dispute for $25 million.

Thomas H. Meeker, Churchill president and chief executive officer, said the agreement brings both horsemen and the Fair Ground's creditors and shareholders together to share a common goal.

"It is paramount to all parties to bring the deal to closure as quickly as possible, well in advance of the upcoming race meet," he said.

The Fair Grounds' season begins on Thanksgiving and runs through March.

Meeker called the Fair Grounds a strategic fit for Churchill and said the New Orleans track "will benefit greatly from our operational expertise, industry-leading brand and simulcast network."

Churchill Downs has tracks in California, Florida, Illinois, Indiana and Kentucky, and an extensive off-track betting (search) operation.