Although Surrey Group only has eight bookmaking shops and has been loss- making for five years, its main attraction is its off-shore betting licence, which enables it to operate from Alderney in the Channel Islands.
The move by Sports Internet comes just a day after Ladbroke announced plans to increase its offshore betting operations from 25 to 200 staff as punters take advantage of tax- free betting in destinations such as Gibraltar and the Channel Islands. Sports Internet was formed by former Leeds United boss Chris Akers.
Set up as a cash shell it acquired Planetonline, a football web site developer in June. It later acquired Opta Index, the country's biggest provider of football statistics. The Surrey Group deal will enable it to offer online betting on its Internet sites within the next few weeks.
Peter Wilkinson, deputy chairman, said: "This is a logical progression of our plan to create a leading Internet sports, betting and gaming group. We have a major Internet platform with content and statistics. What we are adding to that is the ability to place a bet."
It will use its web sites, which include home pages for top clubs such as Newcastle United and Aston Villa, to display advertising and provide information on bets. About 840,000 people used its web pages in July.
The share offer is being made on the basis of 13.5 new Sports Internet shares for every 1,000 Surrey shares. It values Surrey shares at 4.3p, a 32 per cent premium over the closing price on Thursday. The recommended deal has the backing of 17 per cent of Surrey's equity base.