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Gaming chains merge, will lead domestic sales
As Blockbuster Inc. tries to quell a shareholder revolt, two of its biggest rivals in the video game retailing business on Monday agreed to combine forces in a merger valued at $1.44-billion.
By MARK ALBRIGHT
Published April 19, 2005
GameStop Corp., a chain based in Grapevine, Texas, will acquire 28-year-old industry pioneer Electronics Boutique Holdings Corp. for $55.18 a share in cash and stock. With 3,800 stores and sales of $3.8-billion in 2004, the combined company will control 25 percent of domestic video game sales. That leapfrogs the new venture ahead of industry-leading Wal-Mart Stores Inc., which controls 20 percent.
The deal also creates a more formidable rival to Blockbuster's move into the new and used video game sales and exchange business. Blockbuster has been integrating its GameRush video game stores into a counter in its 9,000 traditional video stores around the world.
"This is in the best interests of both companies," said Jeffrey Griffiths, Electronics Boutique president and chief executive.
GameStop, whose largest shareholder is Barnes & Noble chief executive Leonard Riggio, touted the merger as paving the way for expansion into more countries, enhancing its buying strength against Wal-Mart and providing sufficient locations to keep Blockbuster at bay.
The combination is geared to present game manufacturers with a bigger alternative for big, heavily promoted game and system launches and promotions. For instance, GameStop doesn't advertise nationally. But the combined company will. The chain will operate under different names in 170 malls, but the number will be pared down as leases come up for renewal. While GameStop will be the surviving company, officials said it will be 2006 before they decide which store brand name to drop.
Electronics Boutique shares, which are being acquired at a 34 percent premium, soared to close Monday at $55.21, up $14.09. GameStop shares closed at $23.71, up $2.10. Electronics Boutique shareholders will get $38.15 in cash and 0.78795 share in the new company for each share they hold.
--Mark Albright can be reached at albright@sptimes.com or 727 893-8252.
[Last modified April 19, 2005, 01:19:14]
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