Sat. December 9, 2000
Minneapolis, MN -
Best Buy Co., Inc. (NYSE: BBY) today announced it has agreed to acquire Minneapolis-based Musicland Stores Corporation (NYSE: MLG) for $685 million (includes assumption of $260 million in debt) and Seattle-based Magnolia Hi-Fi, Inc. for $87 million. Best Buy also announced its initial international expansion plans. The Company has signed eight leases in Canada and expects to open approximately 65 stores throughout Canada over a three-year period.
"These strategic moves position Best Buy to grow profits through new customers, new channels of distribution and improved operating efficiencies. The acquisitions allow us to deliver digital entertainment technologies to consumer segments not currently served by Best Buy's store format, particularly in rural areas, malls and the early technology adopters," said Richard M. Schulze, Best Buy Founder, Chairman & CEO. "Musicland's leading mall position, combined with our opportunity to transform their product offerings to include MP3 players, cellular, satellite systems, digital imaging, gaming and expanded accessories, will allow Best Buy to capitalize on the strength of the digital product cycle."
Best Buy's Schulze will lead the combined companies as Chairman & CEO. Musicland CEO Jack Eugster will join Best Buy's Board of Directors, and Musicland Group senior officers will remain within the combined companies. Best Buy Senior Vice President Kevin Freeland will be promoted to President of Musicland Stores Corporation.
"Kevin Freeland has a proven track record of success and 20 years of retail experience. He developed our world class inventory management systems, played a leading role in Best Buy's process to profits initiative, and was instrumental in developing this acquisition strategy," Schulze said.
The Musicland acquisition is expected to close in the first calendar quarter of 2001. Best Buy will tender an offer of cash for stock in the amount of $12.55 per share. Magnolia Hi-Fi will be acquired in a cash transaction and is expected to close mid-December. Both acquired companies will continue to operate autonomously as wholly owned subsidiaries. The Company believes that the Canadian market will support approximately 65 Best Buy stores. Management anticipates opening up to 15 stores in Canada in fiscal 2003. Best Buy Senior Vice President Tom Healy will head up the Canadian operation. Healy joined Best Buy in 1990 and led the Company's expansion into the Southeast. Most recently, he was responsible for more than 30 stores generating $1.2 billion in annual revenues. "International expansion allows us to build on our domestic success in becoming a worldwide leader in technology and entertainment products," Best Buy's Schulze said.
Schulze added, "Best Buy's vision is to be at the intersection of technology and life. To realize this vision, we must come to market using a variety of branding concepts and operational formats. This growth strategy accelerates the implementation of our vision through new customer segments and substantiates our presence as the world's preeminent technology and entertainment player."
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