Ladbroke said it would pay $6.25 a share - a total of $35m - for the Denver-based company, which owns three limited stakes casinos in Black Hawk and Central City. Ladbroke will also assume $50m in debt.
A Ladbroke spokesman said the acquisition, not expected to be finalised until late this year or early next, was part of the group's strategy of "building up a portfolio of gaming businesses within jurisdictions which allow gaming".
He added that the two companies had been in discussions for some time, but the deal could not be cleared until licensing arrangements had been agreed with the Colorado authorities. That could take six months. Completion of the acquisition is also dependent on due diligence being carried out.
Although Ladbroke said there would inevitably be some cost savings from integrating the two businesses, especially as Colorado Gaming is a public company, heavy job losses were not anticipated.
Mike Smith, chief executive of Ladbroke's betting and gaming division, said the deal would be earnings-enhancing in the first year.
The strong management team at Colorado Gaming would enhance Ladbroke's existing US management, Mr Smith added. Steve Szapor, president and chief executive officer of Colorado Gaming, will report to John Long, president and chief executive officer of Ladbroke's US gaming business.
City analysts were impressed with the acquisition. One said: "The deal's not huge in Ladbroke terms but it should further establish their base in the US." Ladbroke already owns racetracks in California, Michigan, Pennsylvania, and gaming operations in California.
The analyst added: "They're hoping to get a 20 per cent (pounds 10m) pre-tax return on the business in the first full year. That's a pretty chunky improvement in profitability."
In the year to the end of December 1996, Colorado Gaming reported earnings before interest, depreciation and taxation of $13.4m.
Yesterday's announcement comes just weeks after Peter George, Ladbroke's chief executive, said the group was to sell eight hotels in the UK.
Ladbroke operates 160 Hilton International hotels, but Mr George has been trying to tidy up the company's hotel portfolio at the same time as growing the casino operations.
Ladbroke's shares - which last night closed down 5.5p at 258.5p - jumped to a five-year high in May when the company said pre-tax profit in the first four months was "significantly ahead" of the previous year.